Federal Reserve Chairman Powell used the last interest rate decision of the Federal Open Market Committee (FOMC) in 2024 (also the last Fed meeting during President Biden's term) to cautiously avoid the impact of the upcoming Trump administration's inflation policy, while focusing on the positive results the central bank has achieved in combating inflation and supporting employment.

Powell first emphasized that the FOMC voted narrowly in favor of a 25 basis point rate cut, and he and other members believe this is the right decision.

He said, "I want to say that today's situation is uncertain, but we believe this is the right decision because we think it is the best decision to promote the goals of maximizing employment and stabilizing prices." "We believe that risks are two-way: either act too slowly and unnecessarily disrupt labor market activity, or act too quickly and unnecessarily disrupt our progress in inflation. After weighing the options, we have decided to further cut interest rates

1. The Chairman of the Federal Reserve was initially asked whether the market should expect another rate cut or pause it in January next year, and whether a rate cut in 2025 would be appropriate.

He said, "I believe that the slowing pace of interest rate cuts in 2025 and next year actually reflects the inflation data we have seen rise this year, as well as the expectation that inflation will rise in 2025." "You can see from the Summary of Economic Forecasts (SEP) that we believe the risks and uncertainties surrounding inflation are increasing. Nevertheless, we believe we still have a chance to continue cutting interest rates

He added, "I don't think our actual interest rate cut next year will be due to anything we wrote down today. We will react to the data, which is just the overall feeling that the committee thinks may be appropriate

2. When asked what type of data will trigger further interest rate cuts by the Federal Reserve in the new year, Powell said that the Fed will focus on further developments in inflation and the continued strength of the labor market. He said, "As long as the economy and labor market are stable, we will remain cautious when considering further interest rate cuts

After the Federal Reserve slowed down expectations of interest rate cuts, gold prices fell sharply, and with the continuation of Powell's press conference, gold prices fell again.

3. When asked if the rise in the Fed's mid-term inflation expectations was driven by Trump's victory in the presidential election, the Fed chairman cautiously did not attribute it to the election results.

Powell said about the November 5th election, "This is not the only thing that happened. Our forecast for inflation this year is 50% higher than it was in September. Inflation rose in September and October, and returned to normal in November, but we once again made a forecast for inflation at the end of the year. As we approach the end of the year, this forecast has somewhat collapsed

4. Powell was also asked about the potential impact of Trump's proposed tariffs on the inflation outlook, and whether the Federal Reserve's 2018 Teal Book simulation was useful for this estimation.

He replied, "I do think the Teal Book replacement simulation in September 2018 is a good start. This is an analysis from six years ago, but despite that, I believe it is still the right question. Anyway, this is not the problem we are facing now. We will not face this problem, and we do not know when we will face it. What the committee is currently doing is discussing ways to understand how tariffs affect economic inflation and how to consider this

He continued, "There are many factors involved in this, how many tariffs can even lead to consumer inflation, and how long this situation will last. We know very little about the actual policies, so it's too early to draw conclusions now. We don't know which goods will be subject to tariffs, which countries they will come from, how long they will last, and how large they will be. We don't know if there will be retaliatory tariffs, and we don't know the impact of these factors on consumer prices

5. Powell was also asked about another hot topic that has dominated the financial news cycle since the election, DC, and its potential to become a reserve asset.

He replied, "The Federal Reserve Act sets out what we can have, which is something Congress should consider, but we don't want the Federal Reserve to change the law

6. The Federal Reserve Chairman also discussed the potential impact of geopolitical instability and whether it is affecting the US economy.

He said, "We monitor (geopolitical risks) very carefully, but so far, these risks have not had a truly significant impact on the US economy. The US has not felt the impact of geopolitical turbulence, but we are certainly in a period of increasing geopolitical turbulence, which is still a risk

7. Powell did not rule out the possibility of a rate hike in 2025, but insisted that it is not something that the FOMC expects to happen. He said, "In this world, you can't completely include or exclude certain things, but it doesn't seem like a possible outcome

8. Powell spent some time addressing the tendency to conflate inflation rates with consumer prices, while acknowledging the pressure that high prices bring to ordinary people. He said, "I think what people are feeling now is the impact of high prices, not high inflation

9. The Federal Reserve Chairman also pointed out that despite persistent inflation in certain areas, particularly housing services and home insurance, the state of the US economy is much better than most experts predicted two years ago.

He said, "I think it's clear that we've avoided an economic recession. For a long time, most forecasters have been calling for a slowdown in economic growth, but this hasn't happened. The US economy is performing very, very well, far better than our global peers, and there's no reason to think that the possibility of an economic downturn is greater than usual. Therefore, our economic outlook is quite bright