Powell’s remarks on Friday morning at the annual Fed economic symposium in Jackson Hole, Wyoming, gave few indications that the central bank will cut interest rates at its next meeting.
The chair, under pressure from President Donald Trump to cut rates soon and deeply, listed a series of economic and geopolitical risks that the Fed is monitoring.
Many of them, Powell noted, are linked to the administration’s trade wars with China and other countries, though his outlook remained cautiously optimistic.
“The US economy has continued to perform well,” Powell said at the mountain retreat.
“Business investment and manufacturing have weakened, but solid job growth and rising wages have been driving robust consumption and supporting moderate overall growth.”
With the trade volatility shaking business confidence and contributing to “deteriorating” global growth, Powell said the Fed could not fix everything with monetary policy.
Powell explained that there are “no recent precedents to guide any policy response to the current situation”.
And he added that monetary policy “cannot provide a settled rule book for international trade”.
Amid US-China trade tensions, the possibility of a hard Brexit, ongoing protests in Hong Kong, an economic slowdown in places like Germany and other geopolitical uncertainties, Powell said the Fed needed to “look through” short-term turbulence and focus on how the US is managing itself.
Powell did note, however, that rate cuts in the 1990s helped keep an expansion intact.
The underlying tone of his statement may disappoint investors expecting the Fed to cut rates zealously at its September meeting and possibly several more times this year.
The central bank reduced rates in July in what Powell referred to as a mid-cycle “insurance” adjustment.
His words are also likely to disappoint Trump, both in focusing on the impact that trade uncertainty is having on the global economy, and in not giving a clear signal that more rate cuts are coming.
Powell pledged to gaze beyond “what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives” of two-percent inflation and strong employment.