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Summary
- The FOMC held the federal funds rate at 4¼ – 4½ percent.
- Economic growth has moderated, the labor market remains solid, and inflation is running above 2 percent.
- The Committee remains data-dependent and committed to its dual mandate of maximum employment and price stability.
- A five-year review of the Fed’s monetary policy framework is underway, with any changes to be finalized by late summer.
Opening Statement Transcript
CHAIR POWELL: Good afternoon. My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. Despite elevated uncertainty, the economy is in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment.
Inflation has been running somewhat above our 2 percent longer-run objective. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. We believe that the current stance of monetary policy leaves us well-positioned to respond in a timely way to potential economic developments. I will have more to say about monetary policy after briefly reviewing economic developments.
Recent indicators suggest that the growth of economic activity has moderated. GDP rose at a 1.2 percent pace in the first half of the year, down from 2.5 percent last year. Although the increase in the second quarter was stronger at 3 percent, focusing on the first half of the year helps smooth through the volatility in the quarterly figures related to the unusual swings in net exports. The moderation in growth largely reflects a slowdown in consumer spending; in contrast, business investment in equipment and intangibles picked up from last year’s pace. Activity in the housing sector remains weak.
In the labor market, conditions have remained solid. Payroll job gains averaged 150 thousand per month over the past three months. The unemployment rate, at 4.1 percent, remains low and has stayed in a narrow range over the past year. Wage growth has continued to moderate while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment.
Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal. Estimates based on the Consumer Price Index and other data indicate that total PCE prices rose 2.5 percent over the 12 months ending in June and that, excluding the volatile food and energy categories, core PCE prices rose 2.7 percent. These readings are little changed from the beginning of the year, although the underlying composition of price changes has shifted: services inflation has continued to ease, while increased tariffs are pushing up prices in some categories of goods. Near-term measures of inflation expectations have moved up, on balance, over the course of this year on news about tariffs, as reflected in both market-based and survey-based measures. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2 percent inflation goal.
Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today’s meeting, the Committee decided to maintain the target range for the federal funds rate at 4¼ – 4½ percent and to continue reducing the size of our balance sheet. We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks.
Changes to government policies continue to evolve, and their effects on the economy remain uncertain. Higher tariffs have begun to show more clearly in the prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.
Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem. For the time being, we are well-positioned to learn more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance. We see our current policy stance as appropriate to guard against inflation risks. We are also attentive to risks on the employment side of our mandate. In the coming months, we will receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate.
At this meeting, the Committee continued its discussions as part of our five-year review of our monetary policy framework. We focused on potential revisions to our Statement on Longer-Run Goals and Monetary Policy Strategy and are on track to wrap up any modifications by late summer.
The Fed has been assigned two goals for monetary policy: maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions.
Transcript of the Federal Reserve Chair Jerome Powell's Post-FOMC Press Conference and Q&A Session
Question 1 (Reporter: Unknown):
There’s a lot of lean in the markets, and not to mention out of the administration for a rate cut now in September. Is that expectation unrealistic at this point?
Answer:
So as you know, today we decided to leave our policy rate where it’s been, which I would characterize as modestly restrictive. Inflation is running a bit above 2%, even excluding tariff effects. The labor market is solid, unemployment is historically low, financial conditions are accommodative, and the economy is not performing as though restrictive policy were holding it back inappropriately. It seems to me—and to almost the whole Committee—that modestly restrictive policy is appropriate. All that said, there’s also downside risk to the labor market. In the coming months, we’ll receive a good amount of data to help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate.
Question 2 (Reporter: Steve, Media: Unspecified):
By “coming months,” does that include the possibility you’ll be getting essentially two rounds of jobs and inflation data between now and the September meeting? Is that potentially adequate to make a decision to lower rates at that point?
Answer:
You’re right—we do have an intervening period in which we’ll get two full rounds of employment and inflation data before the September meeting. We’ve made no decisions about September in advance. We’ll take that information, along with all the other incoming data, into consideration when we meet in September.
Question 3 (Reporter: Steve, Media: Unspecified):
You removed the phrase that uncertainty had “diminished” from the statement. Does that mean uncertainty has increased? And now that several tariff deals have been struck, does knowing the likely rates add to your certainty to change policy, or do you need to wait to see the economic effects?
Answer:
The language on uncertainty simply reflects what happened since the last meeting. Last time, uncertainty had edged down slightly; this time it was about the same, so we removed “had diminished.” As for tariffs, we do have a better sense of the rates, but negotiations remain very dynamic. We’re gathering more information, and estimates of effective tariff levels have stabilized somewhat, but many uncertainties still need to be resolved. We’re learning more, but we’re not close to the end of that process.
Question 4 (Reporter: Neil, Axios):
This morning’s GDP report showed final domestic private purchases decelerating at the slowest pace since 2022, with weakness in interest-sensitive sectors and residential investment. Are those not signs that monetary policy is a little too restrictive right now?
Answer:
GDP and PCE numbers came in roughly as expected. Private domestic final purchases—a narrower signal for future growth—slowed to just over 1% in the first half of the year, down from 2.5% last year. Yet the labor market remains in balance: quits, job openings, and unemployment are all similar to a year ago. Job creation and labor supply are both slowing, which keeps unemployment stable. Our mandate focuses on stable prices and maximum employment. The labor market looks solid, inflation is above target (even excluding tariffs), and that’s why our stance is where it is. We do see downside risks to the labor market, but we believe our policy stance is appropriate.
Question 5 (Reporter: Neil, Axios):
Given the fluid labor supply situation, is there a number in Friday’s jobs report that would look to you like “equilibrium” job growth?
Answer:
The key number now is the unemployment rate. If payroll gains have slowed but the break-even level needed to keep unemployment stable has also fallen, the labor market remains in balance. However, simultaneous declines in labor demand and supply do suggest downside risk, so we’ll be watching the unemployment rate carefully.
Question 6 (Reporter: Colobby Smith, The New York Times):
Two of your colleagues dissented, calling for a quarter-point cut today. What aspects of their argument were most compelling to you, and how are you weighing their views against those who favored holding rates steady for the rest of the year? Is the June “dot plot” still the best representation of where the Committee stands?
Answer:
Dissenting views are most useful when they include clear explanations of the reasoning behind them, and we had that today. The majority felt that inflation a bit above target and maximum employment at target warranted a modestly restrictive stance. We had two dissenters who presented well-articulated arguments. As for the June dot plot, it’s now six weeks old and forecasts evolve with new data; we don’t treat it as a real-time guide. We haven’t made any decisions about September—we’ll continue to monitor incoming data and judge whether the federal funds rate is appropriately set.
Question 7 (Reporter: Unknown):
On the point about policy being only “modestly restrictive,” does that mean there isn’t much scope to reduce rates once conditions for a cut are met, barring a significant weakening of the labor market?
Answer:
“Modestly restrictive” is my estimate, but Committee views on the neutral rate vary. We’ll determine when to move toward a more neutral stance based on how the economy reacts; there’s no preset path. The neutral rate isn’t known with precision—it reveals itself over time through economic outcomes following policy changes.
Question 8 (Reporter: Nick Tro, The Wall Street Journal):
What have you learned over the last few months about the inflation-generating and price pass-through process? The June CPI report showed tariff-induced goods inflation. Given the lag between tariff announcements and their appearance in goods prices, is two months enough to evaluate their broader inflation impact?
Answer:
It’s still early. We’re seeing about $30 billion a month in tariff revenues, much higher than before. So far, upstream institutions are bearing most of the cost; consumer prices are just beginning to reflect tariffs, as seen in June. Surveys show companies intend to pass costs on to consumers, but they may face limitations. We need to watch and learn empirically how much gets passed through and over what timeframe. To date, the process appears slower than expected, though we never thought it would be fast.
Question 9 (Reporter: Nick Tro, The Wall Street Journal):
Is the reticence to look through core goods inflation driven by the judgment that expectations proved more adaptive during the pandemic, or by uncertainty over how restrictive policy is?
Answer:
Our base case is that tariff-induced price increases are one-time effects. We will ensure they don’t become entrenched inflation—our tools will prevent that. Efficiency matters: moving too soon risks not fully controlling inflation; moving too late risks unnecessary damage to the labor market. Ultimately, there should be no doubt that we will do what’s needed to keep inflation under control, and we aim to accomplish that efficiently.
Question 10 (Michael McKee, Bloomberg Television & Radio):
The one big bill—leaving aside the adjectives—do you expect it to add stimulus to the economy in 2026? And would that be an argument for remaining on hold or cutting back on the number of rate cuts you would expect for next year?
Answer:
Of course, let me just ritual disclaimer that we don’t express judgments on fiscal legislation. But when you think that the biggest part of the bill was making permanent existing tax law, I don’t see it as particularly stimulative. There should be some stimulus, but it shouldn’t be significant over the next couple of years.
Question 11 (Michael McKee, Bloomberg Television & Radio):
Do you have concerns about the cost to the government of keeping rates elevated for longer in terms of interest‐rate charges?
Answer:
No—I’ll say we have a mandate: maximum employment and price stability. We don’t consider the fiscal cost to the government when setting rates. We focus solely on the goals Congress gave us and use our tools to achieve them. No advanced‐economy central bank factors in government financing needs, and neither should we.
Question 12 (Victoria Guido, Politico):
When it comes to the renovations of the Federal Reserve’s headquarters, do you see the administration’s interest in that issue as being directly tied to the president’s push to get you to lower interest rates? And have any aspects of the project they raised made you reconsider any elements of it?
Answer:
Not for me to say. We had a very constructive visit with the president—an honor, since it’s rare to host him at the Fed. The project was conceived almost a decade ago, cleared through historic‐preservation review, and we’re well along in construction. The president said he wants it finished as soon as possible—that’s our focus, and we’re moving forward to complete it.
Question 13 (Andrew Eerman, The Washington Post):
What message do you take from the fact that inflation hit 2.1% last September and has bounced higher since? Why do you think financial conditions are restrictive and neutral rates are below 4% when inflation has stopped falling for almost a year?
Answer:
With 12-month inflation measures, we battle residual seasonality—early‐year spikes can make levels look misleading. Overall, I think inflation is most of the way back to 2%. We’ve seen “catch-up” inflation—insurance costs now rising after pressures from two to three years ago—and about 0.3–0.4 pp of core inflation from tariffs. We can’t separate tariff inflation out; we look at all inflation. The composition has shifted: services inflation is falling nicely, while goods inflation is now rising, partly due to tariffs and partly because our restrictive policy has worked its way through services.
Question 14 (Andrew Eerman, The Washington Post):
Are you comfortable that the Bureau of Labor Statistics can continue performing its mission effectively if it takes an 8% reduction in headcount and authorized spending as the administration has proposed?
Answer:
I won’t comment on the administration’s proposal. What I will say is that we’re still getting the data we need to do our job. High-quality data matters not only to the Fed but to the government and private sector alike. The U.S. has led the world in data collection for a century, and it’s vital we continue improving our ability to measure a $20-trillion economy in real time.
Question 15 (Reporter: Edward Lawrence, Fox Business)
How concerned are you with the data showing no significant upward trend in inflation over the past six months, that the “wait-and-see” approach to inflation is actually giving companies cover to raise prices?
Answer:
What may be giving some companies cover is not our policy stance but the discussion around tariffs. Firms will raise prices when they can; we saw this during the first Trump administration—washing machines were tariffed, dryers weren’t, yet dryer prices rose anyway. Right now, we’re only at the very beginning of any tariff effects on goods inflation. Those effects may be smaller or larger than people estimate, but they won’t be zero. Consumers, businesses, and retailers will all absorb some of the cost. We’ll have to see how it plays out over time.
Question 16 (Reporter: Edward Lawrence, Fox Business)
Some additional tariffs have been in place since February, and the economy hasn’t broken down yet. How do you justify to someone looking for a house—facing a 7% mortgage—why rates remain so high?
Answer:
Mortgages are tied to longer-term Treasury yields, not the Fed’s overnight rate. We do influence those yields, but we’re not the main driver. The housing sector also faces a long-standing supply shortage that monetary policy alone can’t fix. Our best contribution to improving housing affordability is achieving 2% inflation and maximum employment. Other solutions—building more homes—fall to Congress and the private sector.
Question 17 (Reporter: Chris, media unspecified)
What kind of economic data does the Fed need to see before it’ll be ready to cut rates? Must inflation return nearly to target? Do you need to see labor-market weakness?
Answer:
Ultimately, it could be any of those things. If the risks to our two mandate goals—stable prices and maximum employment—move into balance, that would imply a shift toward a more neutral policy stance. We paused when inflation was above target and the labor market was strong—that’s what “restrictive” means when you have two-sided risks. As the goals come into balance, we would lean toward neutral. The next steps will depend on the totality of the evidence from incoming data.
Question 18 (Reporter: Claire Jones, Financial Times)
The dollar has declined significantly this year. Has that come up in your discussions, and to what degree might a weaker dollar complicate your efforts to get inflation back to target?
Answer:
Exchange-rate policy is the Treasury’s domain, not the Fed’s. It hasn’t been a major focus at our meetings. If you read the transcript years from now, you might see cursory mentions of the dollar, but it is not a central topic for monetary policy deliberations.
Question 19 (Reporter: Claire Jones, Financial Times)
With up to 35% of CPI now “imputed” rather than directly observed, has there been any consideration of alternative data sources—web scraping or big-data methods—to ensure you’re reading U.S. price pressures accurately?
Answer:
We monitor a wide range of data—including novel “big data” sources used during the pandemic—but official government statistics remain the gold standard. We need high-quality, reliable public data to guide policy. While we augment it with private-sector and experimental measures, we can’t substitute for it entirely.
Question 20 (Reporter: Jay O’Brien, ABC News)
President Trump has personally pressured you to cut rates. Are you concerned that such conduct might impact the Fed’s independence going forward?
Answer:
An independent central bank has served the public well by insulating monetary decisions from political pressures. It allows us to focus on data, outlook, and risk balancing rather than electoral considerations. Undermining that independence would harm our credibility—and U.S. fiscal-policy credibility—so preserving it is vital.
Question 21 (Reporter: Mariela Isapuro, Bloomberg News)
You noted a slowdown in consumer spending. With delinquency rates rising among upper-income households, how do you see this evolving, and how vulnerable is the economy?
Answer:
Consumer spending has moderated after very strong growth, but most indicators—including credit-card issuers’ reports—show consumers remain in good shape. Bank-reported credit performance has been solid, and delinquencies aren’t a widespread problem. We’ll watch spending alongside labor-market and inflation data, but for now, consumers appear healthy even as spending growth slows.
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