Quick overview

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Jerome Powell has two more chances to change interest rates before his tenure as chair of the Federal Reserve expires, but he might not need them. Powell highlighted a “clear improvement” in the US outlook and said the job market is showing signs of stabilizing after the Fed kept borrowing costs on hold on Wednesday.

It conveys a cautious optimism: Fed officials implemented three cuts in the fall, and no indication in the most recent data that additional cuts are required to support the economy.

Futures markets anticipate that rates won’t change until June. By then, Powell’s tenure as chair should have come to an end, and a new one should take over, probably ushering in a new phase of President Donald Trump’s rate-cutting campaign, which has rocked the Fed over the past year. The only two officials who voted for another cut this week were Governor Christopher Waller, one of four names on Trump’s short list, and Governor Stephen Miran, who is on leave at the Fed from his position as a top Trump aide. This could be a sign of things to come.

The Federal Open Market Committee voted 10-2 to maintain the benchmark federal funds rate between 3.5 and 3.75 percent. In favor of a quarter-point reduction, Waller and Miran dissented.

Officials removed language from the three earlier statements that suggested there were more negative employment risks. Since the Fed’s December meeting, statistics have shown that growth has accelerated, inflation has decreased, and employment has stabilized.

Powell told reporters on Wednesday that “the outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time.” Despite growing pressure from the Trump administration, expectations for a near-term rate cut are likely to be restrained by that revised labor market assessment.

Powell, however, avoided exaggerating the labor market’s improvement. “I wouldn’t go too far with that,” he stated, despite it having shown signs of stabilizing.