Federal Reserve Chair Jerome Powell struck a measured tone Wednesday, suggesting the central bank is comfortable waiting and watching as the economy finds its footing. But while Powell projected confidence, gold prices told a more dramatic story – surging to record highs even as he downplayed their significance.
"We will continue to make our decisions meeting by meeting… letting the data light the way for us," Powell said following the Federal Open Market Committee's decision to keep rates unchanged at 3.5%-3.75%.
Independence Day (Not the Fun Kind)
Powell wasn't interested in engaging with political criticism or ongoing legal scrutiny of the central bank. When pressed, he kept it brief.
"Today, I will simply refer you to the statement I made on January 11. I am not going to expand on it or repeat it," he said.
He did explain his recent appearance at a Supreme Court hearing involving the Fed's Lisa Cook, calling it a matter of institutional importance.
"That case is perhaps the most important legal case in the Fed's 113-year history," Powell said.
What followed was a forceful defense of Fed independence – not as bureaucratic turf protection, but as fundamental to maintaining public trust and economic stability.
"If people lose the faith that we are making decisions only on the basis of what is best for the wide public, rather than trying to benefit one group or another, it is going to be hard to retain it," he said. "And we haven't lost it. I don't believe we will."
About That Gold Rally
When reporters asked about gold and silver hitting historic highs, Powell essentially shrugged. He rejected the notion that the moves signal lost credibility or macroeconomic trouble.
Powell said the Fed focuses on inflation expectations rather than individual asset prices. "If you look at where inflation expectations are, our credibility is right where it needs to be," he added.
The Fed monitors markets, sure, but it doesn't chase every price swing, he explained. "We don't get spun up over particular asset price changes, although we do monitor them, of course."
Translation: gold can do whatever gold wants to do. The Fed has other metrics to watch.
Tariffs Are the Inflation Story Now
Inflation remains "somewhat elevated" compared to the Fed's 2% target, and Powell pointed directly at tariffs as the main culprit behind stubbornly high goods prices.
Core personal consumption expenditures inflation – the Fed's preferred gauge – ran near 3% over the 12 months ending in December, showing little improvement from the previous year.
"Most of the overrun in goods prices is from tariffs," Powell said.
"That's actually good news. If it weren't from tariffs, it might mean it's from demand, and that's a hard problem to solve."
Services inflation continues to cool, Powell noted, while goods prices remain distorted by tariff effects. Disinflation is more visible in services, according to Powell. The Fed expects tariff-related inflation pressure to fade by mid-2026, assuming no major new tariff hikes land in the meantime.
"We do think tariffs are likely to move through and be a one-time price increase," he said.
No Rush on Rate Cuts
Powell made it clear the central bank isn't committed to a predetermined easing schedule.
"We haven't made any decisions about future meetings," he said. "We are well positioned after the three cuts to let the data speak to us."
Since September, the Fed has lowered rates by roughly 75 basis points, bringing policy closer to neutral territory. Powell said many officials no longer view policy as meaningfully restrictive.
"It is hard to look at the incoming data and say that policy is significantly restrictive at this time," he said.
When asked whether the next move could actually be a rate hike, Powell said that's not the working assumption.
"It is not anybody's base case right now that the next move will be a rate hike," he said, "but ultimately we will do what we think is the right thing."
As for advice to his successor? Powell kept it simple: "Don't get pulled into elected politics."
Market Reactions Tell the Real Story
The U.S. dollar extended its decline following Powell's press conference. The Fed chair declined to address questions about the recent weakness in the greenback.
The U.S. Dollar Index (DXY) fell to around 96.40, giving back earlier session gains.
U.S. equities were mostly flat. The Vanguard S&P 500 ETF (VOO) edged down about 0.1% on the session.
Meanwhile, gold prices surged more than 4% to around $5,390 per ounce, with most of the move happening during Powell's remarks.
The SPDR Gold Shares (GLD) is now up roughly 25% this month, putting it on track for its strongest monthly performance since January 1980.
Gold mining stocks extended their rally, as the VanEck Gold Miners ETF (GDX) climbed 2.5% on the session and has now surged 30% this month, heading for its best performance since April 2020.
So Powell says everything's fine, the Fed is independent and credible, and gold's rally doesn't mean anything. Gold traders, apparently, have a different view.
