empty
07.04.2025 11:11 AM
Jerome Powell Is Not Ready to Intervene

Investors were deeply disappointed when Federal Reserve Chair Jerome Powell made it clear during his Friday speech at the end of last week that he does not intend to intervene in the current market developments.

This image is no longer relevant

According to Powell, the U.S. central bank will not rush to respond to the Trump administration's broad tariffs or to the market turbulence triggered by fears of a global economic downturn. While the tariffs are expected to have a significant impact on the U.S. economy—slowing growth and increasing inflation—Fed officials have decided to wait for greater clarity on Trump's new policies before lowering interest rates.

The market responded immediately. Powell also emphasized that since inflation remains high, the Fed must ensure that the temporary price increases driven by tariffs do not become entrenched.

It is now evident that the Fed is not in a position to offer the kind of economic "insurance" it provided during the 2018–2019 trade war, as inflation remains above target. The Fed's apparent hesitation could result in the U.S. economy falling into a recession in the second half of the year. At that point, the central bank is likely to take action, as there will be more clarity about the trajectory of inflation and the global economy's reaction to Trump's protectionist measures.

"Although the level of uncertainty remains high, it is becoming clear that the scale of the tariffs will be significantly larger than expected," Powell said at the annual conference of the Society for Advancing Business Editing and Writing. "Our responsibility is to keep long-term inflation expectations anchored and to ensure that a one-time price level increase does not evolve into a persistent inflation problem," he added.

In his view, the Fed is in a favorable position to wait for more clarity before considering any adjustments to its policy stance. Powell noted that the central bank's tools can either slow or stimulate the economy, and a choice between the two will be necessary if both inflation accelerates and growth weakens.

Powell's remarks also indirectly point to the Fed's readiness to make broader use of its monetary policy tools, which could include not only interest rate adjustments but also changes to the size of its balance sheet. However, economists remain divided on the long-term implications of such a policy. Some believe decisive action is needed to stabilize prices and prevent an inflationary spiral, while others worry that keeping rates high for too long could slow economic growth and trigger a recession.

It is worth noting that the Fed's next meeting is scheduled for May 6–7. Traders in the futures markets, who had assigned about a 50% chance of rate cuts, reduced those odds to around 30% following Powell's comments.

As for the current technical outlook for EUR/USD: Buyers now need to focus on breaking above the 1.1020 level. Only then can they target a test of 1.1090. From there, a move to 1.1145 is possible, although reaching that without support from major players would be difficult. The final target would be the high at 1.1215. If the instrument declines, major buying activity is expected around the 1.0950 zone. If buyers don't step in there, it would be wise to wait for a retest of the 1.0890 low or open long positions from the 1.0845 level.

As for the technical picture for GBP/USD: Pound buyers need to push through the nearest resistance at 1.2950. Only then can they aim for 1.2990, although breaking above that level will be challenging. The ultimate target would be the 1.3040 level. If the pair falls, the bears will try to take control around 1.2870. If successful, a breakdown of that range could deal a serious blow to bullish positions and push GBP/USD down toward the 1.2830 low, with the potential to reach 1.2760.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

More Time is Needed

Dallas Federal Reserve Bank President Lorie Logan indicated yesterday that it might take some time before policymakers understand how the economy will react to tariffs and other policy changes

Jakub Novak 10:53 2025-05-30 UTC+2

The ECB Should Not Delay Rate Cuts

While the euro is trying to regain its monthly highs after a fairly significant correction seen this week, a survey of several economists shows that the European Central Bank

Jakub Novak 10:49 2025-05-30 UTC+2

Markets Demand an Appeal

The S&P 500 started the day strong but ended on a downbeat note. Initially buoyed by the U.S. Court of International Trade's ruling that the White House's tariffs were illegal

Marek Petkovich 10:33 2025-05-30 UTC+2

What to Pay Attention to on May 30? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are set to be released on Friday, but none are deemed particularly significant. In Germany, the inflation report for May will be released, with expectations

Paolo Greco 06:51 2025-05-30 UTC+2

GBP/USD Overview – May 30: Justice Has Prevailed, but for How Long?

The GBP/USD currency pair closed below the moving average line on Thursday, and the dollar strengthened for three consecutive days. However, everything changed in the second half

Paolo Greco 03:51 2025-05-30 UTC+2

EUR/USD Overview – May 30: Checkmate to Donald Trump

The EUR/USD currency pair continued its slight downward movement on Thursday morning but surged sharply upward in the afternoon. We observed a strong emotional reaction from traders linked

Paolo Greco 03:51 2025-05-30 UTC+2

Trump's Authority Has Been Seriously Undermined

In this review, I will try to explore why the cancellation of Donald Trump's global tariffs is more likely to be negative for the U.S. dollar than positive. At first

Chin Zhao 00:51 2025-05-30 UTC+2

EUR/USD: FOMC Minutes, U.S. GDP, and the Legal Battle

The FOMC minutes released on Wednesday did not excite EUR/USD traders, leaving buyers and sellers unimpressed. The minutes reflected the key points from the accompanying statement and the main messages

Irina Manzenko 00:50 2025-05-30 UTC+2

The Dollar Puts on a Brave Face Amid Adversity

Don't look for a black cat in a dark room—especially if it isn't there. The verdict by the U.S. Court of International Trade declaring the White House's universal tariffs illegal

Marek Petkovich 00:50 2025-05-30 UTC+2

XAU/USD. Analysis and Forecast

The decline in gold prices below the $3300 threshold has triggered a wave of weakness, with the precious metal struggling to regain momentum. Global risk sentiment received a strong boost

Irina Yanina 19:35 2025-05-29 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.