Powell's testimony before Congress: reaffirming the course of patience in rate cuts

In mid-2025, Federal Reserve Chair Jerome Powell reaffirmed his commitment to a wait-and-see approach to monetary policy during a congressional testimony. His stance on interest rates remains unchanged — the economy is in sufficiently good shape, allowing the central bank to exercise patience before making any adjustments to monetary policy.

Focus on Economic Stability and Caution

During his semiannual monetary policy report, Powell emphasized the main principle of the current Fed strategy: “At this point, we are well-positioned to wait for additional information about economic developments before considering any policy changes.” This approach reflects the belief that there is no need to rush to cut rates.

However, Powell’s speech came amid growing disagreements within the Fed’s board. That same week, two board members — Chris Waller and Michelle Bowman — expressed support for a rate cut as early as July, contrasting with the chair’s cautious stance.

Markets Expect a Decision Only by Fall

The probability of a rate cut in July, according to CME FedWatch data, remains minimal — just 18.6%. However, by September, the outlook changes dramatically: the chances of one or more cuts rise above 80%. This indicates that financial markets interpret Powell’s speech as confirmation of a conservative course for the coming months.

The disagreement between the Fed chair and individual board members occurs amid political pressure. President Trump has repeatedly expressed dissatisfaction with Powell’s reluctance to ease monetary policy more quickly. This political backdrop makes Powell’s position even more significant for assessing the independence of the monetary regulator.

Cryptocurrency Gains New Attention in the National Agenda

A notable aspect of the speech was the focus on cryptocurrencies. Powell highlighted a “perceptible shift in tone” regarding the crypto industry within the US banking sector. According to the Fed chair, this signals future growth in digital asset activity due to an “evolving understanding and changing status of the crypto industry.”

Powell addressed criticism that the Fed exerts excessive pressure on banks to stay away from cryptocurrencies. He clarified: “Banks decide who their clients are. As long as safety and stability requirements are met, banks can conduct crypto transactions.” This stance opens the door for more active participation of traditional banking institutions in the crypto ecosystem.

An important point was Powell’s support for advancing cryptocurrency legislation in Congress. “It’s great that bills are moving forward. We need a clear regulatory framework for stablecoins,” he told lawmakers. Such approval from the Fed chair could accelerate the adoption of regulatory standards for digital assets.

Macroeconomic Factors as a Brake on Rate Cuts

Powell’s speech carries additional weight amid analysis by experts from the Peterson Institute and Lazard. Researchers warned that inflation in the US could exceed 4% over the next year due to several factors: the introduction of new tariffs, labor market tensions, potential deportations of migrants, large fiscal deficits, and easing financial conditions.

These macroeconomic challenges significantly limit the Fed’s maneuverability. Higher inflation may prevent the central bank from lowering borrowing costs as aggressively as markets and crypto investors expect. This means Powell’s patience is not just a preference but a necessity in an uncertain environment.

Thus, Powell’s remarks reflect a “wait-and-see” strategy amid conflicting signals: on one hand, the economy shows stability; on the other, macroeconomic risks demand caution in rate decision-making.