Powell's Major Remarks Tonight: Global Markets Focus on Three Key Uncertainties
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Powell's Major Remarks Tonight: Global Markets Focus on Three Key Uncertainties
The venue for Powell's speech was the same place where Trump previously spoke extensively about high tariffs and the replacement of the Federal Reserve chair.
Navigating Web3 tides with focused insightsBy Zheng Yao
All eyes are on Federal Reserve Chair Jerome Powell tonight. He will speak at an event hosted by the Economic Club of Chicago at 1:30 a.m. Beijing time on April 17. Global investors, analysts, and market participants are waiting for Powell’s response to recent economic developments.
Interestingly, the venue for Powell’s speech is the same place where Trump visited in October 2024 to promote high tariffs and call for replacing the Fed chair. Although the U.S. has temporarily suspended tariffs on over 75 countries for 90 days, the overall economic outlook remains uncertain, and concerns about a U.S. recession are rising.
Today’s remarks from Powell are expected to provide key insights into the current economy, the impact of tariffs, and the interest rate path for 2025. The market will focus on three key questions:
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How will the Fed uphold its tradition of independent decision-making amid pressure from Trump's tariff policies and White House calls for leadership change?
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With inflation cooling but recession risks mounting, will Powell adjust his stance on rate cuts?
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As internal "hawk-dove" divisions intensify, could officials like Waller—with their aggressive rate-cutting views—influence policy decisions?
In previous comments, Powell stated that the scale of Trump’s tariff hikes far exceeded the Fed’s expectations and could have a larger-than-anticipated economic impact. Therefore, he believes recent policy effects carry high uncertainty, and the Fed will wait for clearer signals before making further adjustments. He emphasized that the current policy stance is sound and allows for a wait-and-see approach, with policy remaining moderately restrictive. Regarding the risk of recession, Powell noted that while the Fed does not assign probabilities to such outcomes, external forecasters have raised their estimates. On rate cuts, Powell maintained the March meeting view, saying sluggish growth and elevated inflation offset each other, leaving the Fed’s expectation unchanged for two rate cuts in 2025.
Powell faces growing pressure to cut rates from multiple fronts. U.S. inflation appears to be gradually declining. The latest March CPI data shows a continued downward trend. At the same time, Trump has long advocated for low interest rates—a position that now complicates Powell’s decision-making. Rapid and deep rate cuts could reignite inflation, but delaying cuts might further weigh on the U.S. economy.
Powell and most Fed officials still believe it is not yet the right time to cut rates. Despite signs of economic weakness, especially in the labor market, the Fed seems inclined to keep policy rates steady to guard against new inflation risks from Trump’s tariffs. The March FOMC minutes indicate that economic projections and the dot plot suggest two rate cuts may occur in 2025.
However, Trump’s tariff policies not only raise the risk of a U.S. recession but could also force the Fed into more aggressive and frequent rate cuts. Meanwhile, market performance remains weak, reflecting that earlier hopes for a dovish policy shift have failed to spark a real rebound. Investors are increasingly adopting a cautious, wait-and-see stance.
Notably, on Monday this week, U.S. Treasury Secretary Bessent announced that the White House has begun interviewing candidates to succeed Powell as Fed chair. Powell’s current term ends in May 2026. Despite ongoing political pressure from Trump, Powell has repeatedly said in public that he intends to serve out his full term. Wall Street rumors suggest Fed Governor Christopher Waller could succeed Powell as chair after 2026, though his recent views diverge from some members of the Federal Open Market Committee (FOMC).
On Monday, Waller said that if the U.S. president reinstates the tariff measures announced on April 2, the Fed would have to swiftly implement a series of “bad news” rate cuts. Waller warned that if Trump fully reimposes tariffs after the pause period, U.S. economic growth would “nearly stall,” and the unemployment rate would rise sharply from today’s 4.2% to 5% next year. He added that although inflation could spike to 5% in the short term, the upward price pressures might be temporary, creating room for the Fed to cut rates to cushion the slowdown.
Waller said: “While I expect the inflationary effects of tariffs to be transitory, their negative impacts on output and employment could be more persistent and must become an important consideration in shaping monetary policy. If the slowdown becomes severe—approaching a recession—I would favor cutting policy rates earlier and by a greater magnitude than previously anticipated.”
Waller’s warning about rising unemployment aligns with the New York Fed’s consumer expectations survey released Monday, which found that 44% of Americans now expect unemployment to rise over the next year—the highest level since the pandemic—and up 10 percentage points since Trump took office.
Most other FOMC members advocate a “wait-and-see” approach, stating they won’t adjust rates until hard data confirms a tangible economic slowdown. Powell currently shares this view.
Since early 2025, the Fed has kept interest rates steady in the 4.25%-4.5% range. Markets currently expect three rate cuts in 2025, starting in June. According to the CME’s “FedWatch Tool” on April 16, there is an 81.4% probability the Fed holds rates steady in May and a 60.1% chance of a 25-basis-point cut in June.
In addition, several investment banks have recently increased their expectations for Fed rate cuts this year. Deutsche Bank was the latest to revise its forecast, now expecting a 25-basis-point cut in December—previously it had expected no cuts in 2025. It also forecasts two additional 25-basis-point cuts in Q1 2026, bringing the terminal rate down to 3.5%-3.75%.
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