Kicking off this morning’s closely watched Federal Reserve Board conference, Chair Jerome Powell focused his opening remarks on the Fed’s ongoing review of capital requirements for big banks.
He thanked Vice Chair for Supervision Michelle Bowman and the Fed staff for their work, and highlighted how thorough and wide-ranging the review has been.
But despite the focus on banking regulation, most investors and analysts had their eyes on something else entirely: any clues Powell might offer about where interest rates are headed next.
Powell’s speech today
Powell emphasized the need to keep the banking system “safe, sound, and efficient,” noting that the Fed is taking a close look at everything from risk-based capital rules to leverage ratios, stress tests, and the extra requirements placed on the largest, most complex banks.
He stressed that all of these elements are being reviewed together, not in isolation, to make sure the overall framework still makes sense in today’s fast-changing financial world.
He also pointed to Vice Chair Michelle Bowman’s key role in the process, highlighting her deep experience in bank supervision.
According to Powell, Bowman’s leadership is helping ensure that while big banks stay well-capitalized, they also remain competitive and continue playing their part in supporting the broader economy.
What was expected?
While the conference was centered on bank regulations, what really had markets on edge was the possibility of a shift in Fed policy, especially any hints about when a rate cut might happen.
Investors were tuning in closely, hoping Fed Chair Jerome Powell or other officials might drop subtle clues about where things are headed.
Despite some progress on inflation, the Fed has held back from signaling any clear move toward easing.
Inflation has cooled somewhat, but it’s still hovering above the Fed’s 2% target enough to keep policymakers on guard.
That’s made them hesitant to unwind the rate hikes they’ve rolled out over the past couple of years.
Adding to the uncertainty is the strong labor market.
Jobs data continues to come in solid, and with unemployment low and wages holding up, there’s little immediate pressure for the Fed to cut.
A healthy job market can support spending, which in turn can keep inflation sticky, exactly what the Fed is trying to avoid.
Lately, Fed officials, including Governor Michelle Bowman, have struck a measured tone. They’ve made it clear they’re not ruling out rate cuts, but they’re not in any hurry either.
Any move, they stress, will depend entirely on what the data says, not what the markets want or what politicians may be pushing for.
Because of that, market expectations have started to drift. There’s no clear timeline anymore.
A lot of analysts are circling late 2025 as a possible window, but even that’s more of an educated guess than a confident forecast.
Bottom line: until the numbers truly line up, the Fed isn’t likely to blink.
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