The Fed’s outlook has soured vs its March forecast. “We expect a meaningful rise in inflation in the coming months,” said Powell.
Trump will not be pleased with the Fed’s outlook. In the press conference, the Fed highlighted more concerns of tariffs on inflation and growth.
Regarding jobs, Powell said the labor force, participation rate, wages are all at “healthy levels”.
“You can see perhaps a very slow cooling but nothing that troubling at this time.”
Apparently Powell believes BLS statistics. I don’t. He does not see the train coming down the tracks.
Press Release
As is typical, there is more information in the press conference than the Fed’s Press Release.
Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Press Conference
Skip forward by about 59 minutes.
PCE Inflation
“We expect a meaningful rise in inflation in the coming months,” said Powell.
“Consumers, businesses, and professional forecasters point to tariffs as a driving factor.”
“Increases in tariffs this year are likely to push up prices and weigh on economic activity.”
Powel noted the possibility of “tensions” in economic policy. That’s the stagflation outcome of rising prices and falling employment. “For the time being, the Fed is well positioned to wait.”
“Our job is to make sure that a one time increase in inflation does not turn into an inflation problem.”
The Fed said “We have not been in a situation like this before,” and that everyone will pay the cost of tariffs (consumers and importers).
Trump believes we collect tariffs from countries.
There’s a very good chance unemployment arrests the Fed’s expected inflation. But that assumes I am correct on weakening jobs.
Projection on Appropriate Monetary Policy Rates
“There is no high conviction on the rate path.”
GDP Projection
Powell said “unusual swings in imports have complicated GDP estimates.”
Summary of Economic Projections (SEP)
Chart from Fed’s Summary of Economic Projections.
SEP Change from March
- GDP: 1.4 percent from a year ago, 4th quarter, down 0.3 percentage points
- Unemployment Rate: 4.5 percent, up 0.1 percentage points
- PCE Inflation: 3.0 percent, up 0.3 percentage points
- Core PCE Inflation: 3.1 percent, up 0.3 percentage points
- Fed Funds Rate: 3.9 percent, unchanged
The market expects 2 rate cuts by December, the Fed only 1.
Powell said “unusual swings in imports have complicated GDP estimates.”
Indeed.
Related Posts
June 16, 2025: QCEW Report Shows Overstatement of Jobs by the BLS is Increasing
The discrepancy between QCEW and the BLS jobs report is rising.
June 15, 2025: Is the Fed Behind the Curve in Cutting Interest Rates?
That’s the claim in a Wall Street Journal op-ed.
June 17, 2025: Retail Sales Down Much More than Expected, Drop 0.9 Percent
Retail sales declined 0.9 percent led by autos down 3.5 percent.
June 18, 2025: Housing Starts Plunge 9.8 Percent to the Lowest Level in 5 Years
The homebuilders have spoken. And they don’t like what they see.
June 18, 2025: Intel Will Lay Off Another 15% to 20% of its Work Force
Big job cuts are coming in July.
Q: Is there any doubt the economy is slowing?
A: None
And Trump’s tariff policies greatly exacerbate the setup.
Addendum
I used the word “blame” in the title. Changed to “citing” tariffs.
Blame the Thump for negotiating tariffs higher. Uh? It’s obvious to the world that the US Fed Bankers have dirty hands, cutting half a point six weeks before an election without data to juice the DNC election. But, now using DNC logic they defy the rate cuts by Central Banks across the globe.
US has even lower inflation rates and weakness to employment per increasing unemployment rate. Forget two new wars, 15% jump in world oil price this month, housing collapse, government layoffs, etc.
But, but it’s the Thump, draped in the Beltway BS of “patience” and “conservative.” Give Powell a Nobel Prize for BS he can share with James Comey and Dr. Fauci.
what nonsense. they didn’t juice anything for the election. why would they?? Powell was made chairman by Trump. inflation was improving. now it is not and there’s reason to think it’ll keep going.
Why 2 percent inflation rate. The Fed’s mandate states “stable prices” what part of stable is a 2 percent annual increase?
Do you think the Powell is afraid to state what he really thinks, causing a self fulfilling prophecy.
WMD 2.0. THE FIRST TEST A QUARTER OF A CENTURY TOLD ME WHO THE GULLIBLE AND SCARED AND NON THINKING, AMONG MY FAMILY AND FRIENDS WERE. THE PERCENTAGE WAS ASTOUNDING. A CENTURY OF SELF PRODUCES SO MANY NIHILISTS WHO NEVER DID ACTUALLY THINK ABOUT ANYTHING WORTH A DAMN, OUTSIDE OF SPORTS BALL AND THYSELF
all caps at 7:00 a.m. that seems healthy.
Just two questions:
1) Is it not possible to get both high inflation and unemployment? This is what happens in EMs and what happened in the 70s. E.g. a supply shock exceeds a demand shock
2) Won’t Trump’s tax cuts and deficit spending help stimulate the economy?
Yes.
No.
The 1970’s
this will make the 70s look like a piece of cake. i remember 70s. hood i grew up in all wall street owners and rich construction and r/e owners. lots of bankruptcies. many men just put on tie and suit and went to bar for the day. now the empire is completely destroyed and being run by a schizo lunatic with a cult of morons all jacked up on fentanyl, meth and homelessness and dumb fuckery.
I was there also. Today feels nothing like then. I was young, full of life and more interested in getting laid than the inflation rate. Now all I have left is the inflation rate.
Being alive in 1970 isn’t the same as dealing with that mess. I was 25 in 1970 and had to put up with a terrible economy until the early 80’s. If Dad was paying your bills, you have no idea!
Dad never had the extra money to pay my bills. I did something called “work”. Paid my own way throw college and then sold my soul to the government to keep from starving. I remember well.
Last I checked, we don’t have to wait in lines for gas for our cars… I did in the 70’s. Maybe he just had the wrong year? The 70’s was a mess!
You are too young to remember the 70’s. How old were you in 1970? Maybe 10?
> Finally the Biden/Harris empire is nearly destroyed, and what’s left of it, is destroying itself. They Eat there Own as we all know…
>> Now we are being run by a Serious Party of Wise Men. Eliminating Illegal Drugs in Our Country, and those that brought them, Eliminating Homelessness in Our Country, and those that caused it, Stopping the absolute Waste of Taxpayer Dollars, and spending much more wisely, Etc. I feel like we finally have direction and a real effort to bring the Country back to proper ideology, financial order, and “Rule of Law”
You think we are going to eliminate drugs a homelessness?
Seriously?
something is better than nothing. almost impossible to believe we’d eliminate them but arguably harder to believe any serious effort has been aimed at either issue in the past 5 years (and that’s being kind to the left). the explicit and implicit costs of both issues are detractors from a better functioning economy and country.
Obviously not Mish, as I was referring to elimination of the amount of it. I suppose I could have been clearer, but we will always have homelessness and drugs.
There will also be some wasted Taxpayer money as well, as that’s in the same boat as the others, and many, many more.
I am thrilled with what I have seen in regards to this sort of behavior being diminished, and that’s a start, so Kudos to the people that are making a difference, and doing the unseen and unmentioned work, as it’s great for “Our Overall Country”
#1 Yes, of course, 1970 redux.
#2 Yes, the deficit spending will continue to stimulate the economy as it has ever since the last real recession back in 2009 then compounded 3x during COVID. Tax cuts will help as well. Time will tell if they bring in extra revenue. That’s where I would disagree with the supply siders at least this time around.
I would guess that if more than $300B in deficit spending were removed from the economy, then the chances of a recession rise considerably. But Congress isn’t going to cut anywhere near that amount, nor would Trump sign legislation that does.
Ultimately, it will take more & more deficit spending to juice the economy as time passes. This goes for the Fed as well as they come up with clever ways for the banking system to buy more treasuries as the Fed mostly sits on the sideline.
What will be interesting is the moment the Fed has to start buying treasuries outside of a NBER declared recession that doesn’t just maintain its balance sheet which they are doing now but actually start growing their assets.
That’s when you know the moment of truth is closing in on us.
There will be a huge increase in military spending to replace GDP and wipe out the Iranians and anyone that steps up to defend them. Oil prices will be elevated for a while, but even that should settle down as the Neo-Cons take over Irans oil and gas resources.
Iraq is subdued and Afghanistan is a worthless shit hole so not much interest in going back there. Pakistan is feuding with India so they are have more important things on their mind than saving Iran. Syria and Jordan have nothing and Egypt is not interested in Iran. Russia can’t even take over the Ukraine and is happy to sell its oil in the wake of Irans demise while hoping that Irans oil infrastructure gets destroyed. My take is that Irans oil infrastructure is being protected for the most part. Symbolic hits that are easily repaired.
The Permian basin is peaking in its production in 2025 or 2026 so U.S. production is probably past its peak.
Perfect time to take Irans oil fields over and apply our fabulous production methods. Oil likely to be back to $65 per bbl by September.
The Fed is sitting in the sweet spot on interest rates and waiting for the bond market to lead them to the promised land.
Nothing to see here, move along…
.
Invade Venezuela instead of Iran.
Venezuela has lots of oil, is closer, and they speak Spanish as does much of the US.
Better to invade the Cayman Islands. There are trillions of dollars there and thousands of companies and completely unguarded.
It’s all about the oil and natural resources. the nuke is an excuse.
More than 2 decades after taking over Iraq their oil output remains below what it once was. So I have little confidence we can apply some ‘fabulous methods’ and increase production there.
As long as the working class slave dumb voting idiots keep paying taxes to the elite class nothing will change…Follow the bouncing ball little kids.
yeah. that three and a half percent effective income tax rate they pay is really a big deal. you can talk about wealth inequality and income inequality in the US and have a lot to talk about. in no universe, however, can you pretend that the working class pays either a high amount or a disproportionate share of taxes. where in God’s name are people studying economics these days?
Taxes and insurance premiums that is… 😉
The death of some high attraction areas is coming fast, no insurance at any cost
…The growing crisis in the insurance industry may make it hard to get a mortgage in parts of the country in the coming decades, Federal Reserve Chairman Jerome Powell said on Tuesday.
“If you fast-forward 10 or 15 years, there are going to be regions of the country where you can’t get a mortgage,” he said during his semiannual testimony to Congress, noting that banks and insurance companies have been pulling out of coastal and fire-prone areas they deem too high risk….
And the Fed board of governors including Powell and the Republicans and Democrats and all their campaign donors are entirely at fault for that because they pushed down interest rates by “buying” mbs with trillions in money printing enabling a speculative frenzy in real estate that caused exploding prices and therefore the cost to insure.
https://fred.stlouisfed.org/series/WSHOMCB
so if unemployment breaks and we flirt with or go full on into a recession, and the Fed cuts more than expected,what do long dated treasuries do with 36 trillion dollars of debt behind them?
WTI Crude Oil is now trading at $75 per bbl. The day of the election it was trading at $69 per bbl. Regular gas was $2.96 on Election Day and today it is $3.49. That is inflationary.
Only a few weeks ago oil was trading at $63 and one could make a case that this would play a role in reducing inflation. Now oil is up 15% and could go far higher with a war monger in office.
Additionally, the tariffs are going to be an immense tax on importers and passed through to consumers. Another significant increase in the likelihood of inflation.
Both higher oil and tariffs act to slow the economy in general which provides support for lowering interest rates. As Powell states, it is too early to tell what trumps chaos creating policies will do to our economy.
Lots to consider for Powell.
Trying to predict what trump will do is like trying to figure out what a spoiled toddler would do with a machine gun!
Consumers dont have to pay for the tariffs. They can go on buyers strike and let the corporations eat the tariffs which they can because they have huge profit margins. Theres nothing wrong with US consumers buying less stuff. We’re filling the oceans with garbage because we consume way more per capita than most people around the world.
The Fed didn’t need to do anything. Inflation and unemployment are opposing forces, and balanced at the moment. The Fed will take action when the bond market makes a big move or one opposing force begins to dominate the other.
wait. are you saying the business cycle is not dead? I thought all of that was just 20th century nonsense.
re “ Inflation and unemployment are opposing forces”
Hardly. It’s just that the economy is being run in reverse.
if unemployment breaks hard enough, prices will come down.
It’s the grandest irony that TACO keeps wanting the Fed to lower rates and he alone has the power to do it by ending his tariff nonsense. Alternatively, the court can take that power away from the toddler and inflation might not be an issue.
The longer the tariff game continues, the harder it will become to ramp up production which in effect will make the chance of higher inflation to happen and remain high.
I can’t see him ever backing down voluntarily. Maybe he’s secretly hoping the court will go against him so he can attack them for ruining his efforts to MAGA.
Most of the things Trump is doing will stoke inflation. In his classic style, he will blame everyone but him for the inflation/recession when it comes our way.
Tariffs, deporting immigrants, war in ME, huge deficits …
re: “We expect a meaningful rise in inflation in the coming months”
That’s what my model said last year.
Get back with us when tariff related inflation clearly shows up in the data.
Import Prices Signal Low Inflation, China Reducing Prices To Fend Off Tariffs
Many Exporters No Longer Want Dollars, US Bank Executive Says
Many Exporters No Longer Want Dollars, US Bank Executive Says – Bloomberg (archive.ph)
Capital flows dwarf trade flows into and out of the dollar. From memory I believe capital flows account for 88% and the rest comes from trade flows so that some companies have clients that want to be paid in Euros or whatever have virtually no impact on dollar flows and movements.
Glad to see that Powell and the fed didn’t cow down to TACO. If the latter wanted to help the economy, he would capitulate one last time on the inflationary tariffs.
A calm, levelheaded, non-panicked Fed, doing the sensible thing. But it’s always all got to be a cliffhanger with Trump, right? Impulsiveness and of course, insults. That’s what I expect. Globally, locally, all day and night.
Will Trump fire (or force out) Powell? I believe Trump will become more desperate as inflation bites and Powell refuses to back down.
He will wait for his term is up in eight months. Till then he can blame the Fed. If the Fed lowers rates Trump can take credit. If the Fed doesn’t lower rates then Trump can blame the Fed also so it works out for Trump politically either way.
Remember, Tariffs are a one-time hit. It’s not like they continually increase inflation. IMHO, tariffs are not going to have the sort of pronounced effect on inflation that you all seem to think they are. CPI isn’t going to spike from 2.4% in May to 3% overnight. Moreover, most of the economy has adjusted (doesn’t mean people for example like it) to higher than they’d hoped for inflation. We’ll know what the general effect on inflation will be by the time the July data arrives in August. I would expect inflation to rise between now & into August & then stabilize at 2.6% at most. This will force the Fed to continue to wait & see. If it rises above 2.7%, then a 25-50 BP increase may be on deck. This would be the exact opposite of what Trump wants, and MAY force his hand at meaningfully backtracking on some tariffs.
Have they factored in closing of the Strait of Hormuz?
How many times has the Strait of Hormuz been closed?
No, but the threat to attack traffic means that insurers will not allow the ships to sail. The Houthis demonstrated that with their attacks. Even though the Houthi capabilities have been diminished, the traffic there is still at 1/3 of what it was because of spoken threats to traffic.
If I were an insurer, I would take the premium because Iran is relatively powerless against Israel and the U.S.. The U.S. is far more involved than is in the news in supporting the new war against Iran.
Quite frankly Iran appears to be completely on its own and defenseless.
Clearly, if someone comes to Iran’s aid, their nation will also be turned to dust. Israel is literally destroying Tehran, indiscriminate and relentless bombing just like it did with GAZA. Women and children burning to death in their homes and on the streets.
Nothing to sugarcoat here, the U.S. and Israel are going to wipe out their enemies in the Middle East and take their oil. Our dependence on oil will be solidified for the foreseeable future and the weapons industry will be flooded with contracts for the tools of the trade.
No one reading this would want to be in Iran right now!
BOOM!
Have the Illinois Tollway Authority manage it.