- Powell said rate hikes are no longer the Fed’s base-case scenario.
- Policymakers are split between holding rates steady or beginning cuts.
- The Fed’s tightening phase appears largely complete.
Federal Reserve Chair Jerome Powell made a notable shift in tone by stating that another rate hike is no longer the central expectation inside the Fed. According to Powell, raising rates is not anyone’s base case right now, and he’s not hearing serious internal pressure to push policy tighter. That alone marks a meaningful change from earlier phases of the cycle, when the possibility of further hikes always hovered in the background.
A Policy Pause Is Gaining Support
Powell explained that a portion of policymakers believe interest rates are already positioned appropriately. Their approach is straightforward: pause and observe. After one of the most aggressive tightening cycles in decades, holding rates steady gives the economy time to absorb previous moves, particularly across labor markets and inflation dynamics. For many officials, patience now outweighs urgency.
Rate Cuts Are Actively Being Considered
Beyond a pause, Powell acknowledged that some policymakers see room for rate cuts, potentially one or more, over this year and into next. When Fed officials submit their policy projections, Powell said the assumptions largely cluster around holding rates or easing them. The absence of hike assumptions is telling. It suggests internal consensus is shifting toward maintaining or loosening policy rather than tightening further.
What This Shift Signals for Markets
Taken together, Powell’s comments indicate the Fed believes its tightening work is mostly done. The internal debate now centers on timing and degree, not direction. Unless incoming data changes sharply, rate hikes appear firmly off the table. For markets, borrowers, and risk assets, that shift introduces a calmer and more predictable backdrop for monetary policy moving forward.
