5 main reasons why Jerome Powell decided to stay tuned — Inflation remains above the Fed's target of 2.6%

Federal Reserve Chair Jerome Powell remains steadfast on interest rates, maintaining the current level despite increasing pressure for monetary policy easing. In recent months, economic indicators have shown strength across key sectors, reinforcing the central bank's cautious approach. The decision to delay interest rate cuts reflects concerns about inflation, a tight labor market, and steady consumer spending. Due to inflation currently at 2.6%, which is still above the Fed's target of 2%, this remains a key consideration. In addition, strong GDP figures and stable service prices have added weight to the central bank's decision-making process. Inflation remains high, service prices are adding pressure. While headline inflation has eased, it remains 0.6% above the Fed's preferred threshold. Core inflation, particularly in services, remains persistent. These categories include housing, healthcare, and insurance, which are areas that adjust more slowly. The prices of services are rigid, unlike goods, and react gradually to changes in policy. Therefore, reducing interest rates may not lead to immediate deflation. This forces the Fed to be cautious. Moreover, any hasty moves run the risk of reigniting inflationary trends. The inflation outlook has improved since last year, but Powell continues to emphasize patience. Although there has been a slight decrease in some areas, the service component continues to exert overall upward price pressure. The labor market conditions remain tight. In addition to concerns about inflation, the Fed continues to closely monitor employment data. The labor market remains resilient, with unemployment near record low levels. This tight labor market is driving wage growth, which could contribute to inflationary pressures over time. Powell noted that while job creation has eased slightly, labor demand continues to outpace supply. These conditions indicate continued strength in employment, which complicates the case for easing policy. However, the Fed must also weigh these dynamics against long-term inflation control. Strong consumer spending and GDP growth Consumer activity remains strong, with spending continuing to increase in recent quarters. Retail and service sectors have reported stable demand, supported by income growth and stable job security. This steady consumption level has helped support GDP growth, which has remained resilient in recent quarters. Currently, there are no overall indicators of a recession. Due to the stable economic activity, Powell and other policymakers see little urgency to lower interest rates. Furthermore, the credibility of the Fed depends on maintaining the inflation target. Any adjustment to interest rates must align with sustainable progress in price stability.