Powell's Lecture Sets the Course for Monetary Policy: Strong U.S. Economy vs. Ongoing Inflationary Pressures

Federal Reserve Chair Jerome Powell sent mixed messages to financial markets in his recent statements. On one hand, he reaffirmed the strength of the US economic fundamentals, but on the other hand, he warned that persistent inflationary pressures continue to hinder monetary policy easing in the near term.

Economic Outlook: Sustainable Strength with Notable Improvement

Powell indicated that US economic activity has shown significant positive development since the last Federal Reserve meeting. This improvement reflects ongoing demand for services and goods, suggesting no real signs of entering a recession. According to reports from Investing, the Federal official confirmed that the US economy maintains a solid foundation supporting stability in the medium term.

Inflation: The Main Obstacle to Rate Cuts

Despite the positive picture of economic activity, Powell warned that current inflation rates still pose a real concern. After inflation reached 3% according to the latest data, the Federal official described it as “still requiring close monitoring.” This point is the key factor preventing the start of a new cycle of interest rate cuts, despite pressures the central bank may feel from certain sectors of the economy.

Powell Prefers Flexibility Over Full Stance

Regarding monetary policy, Powell clarified that the Federal Reserve prefers to maintain policy flexibility rather than adhere strictly to a single stance. This means that decisions to raise or hold interest rates will be made “meeting by meeting” based on available economic data at the time. In a positive sign for investors, Powell viewed the rate cuts implemented in 2025 as positioning monetary policy strategically well to handle current and future developments.

Government Shutdown and Expected Economic Impacts

The Federal Reserve Chair added that the ongoing government shutdown will leave its mark on economic performance noticeably. Powell expects the real effects of this shutdown to become clear during the first quarter of this year, which could influence future monetary policy decisions.

Market Reactions and Digital Asset Outlook

Powell’s comments triggered volatility in various asset prices. Bitcoin experienced a 2.68% decline, reaching $69,533.39, while Ethereum dropped 3.10% to $2,063.51. These movements reflect the sensitivity of digital markets to monetary policy and expectations about future interest rates. Meanwhile, digital gold (PAXG) rose slightly by 0.72%, maintaining its appeal as a safe haven in an uncertain environment.

Summary: Calculated Market Caution

Ultimately, Powell’s stance and that of the Federal Reserve remain characterized by careful balancing. The US economy maintains its strength and avoids recession fears, but stubborn inflation remains a barrier to rate cuts. In this context, the Federal Reserve may continue its “calculated watchfulness” policy, awaiting more economic data before taking further steps toward easing monetary policy.