Federal Reserve Chair Jerome Powell made clear on Wednesday that the central bank isn’t preparing to intervene in financial markets, even as stocks slide and uncertainty mounts. Markets, he said, are just fine.

Federal Reserve Chair Jerome Powell speaks at an Economic Club of Chicago event.

Speaking at the Economic Club of Chicago, Powell acknowledged that recent tariff-induced volatility has tightened financial conditions. But he rejected the idea that falling equity prices and rising bond yields alone would prompt a policy response.

Rather, his remarks painted a picture of a central bank on hold in terms of interest-rate cuts or other changes to monetary policy. Powell said Fed officials need to have “greater confidence” that inflation is moving toward the central bank’s 2% annual target before further cutting rates, and that because of the Trump administration’s tariffs, achieving such confidence is likely to take longer than previously expected.

The Fed doesn’t see a broad-based pullback in credit, he said, noting “markets are functioning as you would expect them to in this time of high uncertainty.”

That was the heart of Powell’s message to Wall Street: The Fed isn’t here to shield investors from losses, and the bar for intervention remains high.

Powell’s comments accelerated a selloff in stocks sparked by chip-sales restrictions on Nvidia. The S&P 500 slid more than 2.2% on the day, and the Nasdaq Composite lost 3%.

“My sense is that [Powell] was a bit more hawkish than the market was prepared for,” said RSM Chief Economist Joe Brusuelas. “He was clear about the origin of the reigniting of inflation and that the Fed is going to lean toward price stability when making policy in the near term.” 

Powell emphasized that the Fed is “not inclined to react to every fluctuation” and drew a sharp line between what he sees as market volatility versus dysfunction. 

In other words, there is no “Powell put” under current market conditions.  

The Fed chair also issued a warning about President Donald Trump’s evolving tariff policy. 

“Tariffs increase costs,” he said. “The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects.”

As Fed officials attempt to navigate these changes, he said, there is a growing risk of stagflation, or sluggish growth coupled with inflation. Fed officials could find themselves in a “challenging scenario” where their dual goals of promoting maximum employment and stable prices “are in tension,” he said

Based on futures-market trading, investors are expecting multiple rate cuts in 2025. Traders currently are pricing in four rate cuts by December, according to the CME FedWatch tool.

“We don’t expect that the next move will happen soon,” wrote Michael Feroli, chief U.S. economist at JPMorgan in a note on Wednesday afternoon. He forecasts that the Fed will remain on hold until September. 

It can afford to wait, Powell said. With job growth still strong and consumer spending steady, the Fed believes it has time. “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” he said.

That patience may soon be tested, however.

Key economic data, including gross domestic product and personal consumption expenditures (the Fed’s preferred inflation gauge), are due out at the end of the month and could signal higher prices and slower growth than expected. And with corporate earnings season underway, indications that businesses are cutting forecasts or seeing margin pressure from tariffs could increase pressure on the Fed. 

But for now, Powell appears unmoved.

The S&P 500, Nasdaq Composite, and Dow industrials, down 1.7% on the day, experienced their largest Fed-speech day drops since December 18, according to Dow Jones Market Data, when the central bank cut its federal-funds-rate target range by a quarter of a percentage point to 4.25%-4.50%, but indicated there were fewer cuts ahead.