By Nick Timiraos

Federal Reserve Chair Jerome Powell said elevated uncertainty, including from recent changes to trade policy, remains a wild card for economic activity this year, and he signaled the central bank was comfortable maintaining its current wait-and-see stance on interest rates.

"As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry, and are well positioned to wait for greater clarity," Powell said in remarks prepared for delivery Friday at a conference in New York.

The Fed cut interest rates by one percentage point last year after an aggressive effort to lift rates to a two-decade high in 2022 and 2023 to combat inflation. Inflation declined to around 2.5% in January, using the Fed's preferred gauge. The Fed targets 2% inflation over time.

Powell said the Fed could maintain its benchmark short-term rate, currently around 4.3%, if the economy remains on solid footing and inflation doesn't continue moving down to its goal. An unexpected weakening in the labor market or a decline in inflation would allow the Fed to resume lowering rates, he said.

"Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place," Powell said.

Powell pointed to how the White House is in the process of revamping policies across multiple fronts: on trade, immigration, regulation, taxes and spending. "It is the net effect of these policy changes" that matter for the interest-rate outlook. "While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their likely effects remains high."

Write to Nick Timiraos at Nick.Timiraos@wsj.com

(END) Dow Jones Newswires

March 07, 2025 12:30 ET (17:30 GMT)

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