A non-event

The Fed left rates unchanged yesterday — and Powell’s message was essentially: stay the course. He acknowledged that the growth outlook has improved since the last meeting, which should support labor demand over time. But he also kept the door open on the labor market narrative, a clear sign the Fed wants maximum flexibility for the two remaining meetings under his chairmanship.

On inflation, Powell sounded cautiously constructive, yet the numbers remain uncomfortable. The Fed’s preferred gauge — the PCE inflation measure (and especially core PCE) — is still running around 3%, roughly one percentage point above the Fed’s 2% target. Powell also pointed to an important detail: much of the overshoot has come from goods prices, which the Fed believes is linked to tariffs.

Bottom line: policy steady, independence intact despite rising political pressure, and markets barely moved.