“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully. Ultimately, the path of the policy rate will depend on how the incoming data and the economic outlook evolve.”

This was followed by his succinct yet impactful comment that “IF DATA LET US GO SLOWER, SEEMS LIKE RIGHT THING TO DO.” These remarks sent a clear signal to markets that the Fed is taking a measured approach, emphasizing data dependency over a predetermined path for monetary policy. 

The immediate market reaction was telling, with investors scaling back their expectations for imminent rate cuts. Just one week ago, Powell’s last FOMC meeting seemed to align with market pricing for a gradual policy path, but his latest remarks add a fresh layer of caution. Markets may now have to reassess their assumptions about the pace and extent of easing, introducing fresh volatility.

The ongoing resilience of the U.S. economy—marked by stronger-than-expected growth and a still-tight labor market—further underscores the rationale for Powell’s hawkish undertone.

While some might have interpreted the initial rate cuts as the start of a dovish pivot, Powell’s remarks suggest otherwise. Instead of rushing to support markets with aggressive easing, the Fed is signaling a willingness to wait and watch. 

This, I must say, offers a slight sense of relief, as many anticipated that Powell and the FOMC might “drop the towel” on inflation and proceed aggressively with rate cuts—potentially risking a reflationary cycle reminiscent of the 1970s. However…