Powell Stalls, Tariffs Loom, and Consumers Turn Gloomy
Federal Reserve Chair Jerome Powell told the House Financial Services Committee on Tuesday that the central bank is in no rush to move interest rates, even as fresh tariffs cloud the outlook and inflation remains sticky. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” he said while presenting the Fed’s semi-annual Monetary Policy Report. Investors quickly digested the wait-and-see message—and ongoing geopolitical jitters—by bidding spot gold to an intraday high of $3,324 per ounce. Meanwhile, the Conference Board’s Consumer Confidence Index sank to 93.0 in June, highlighting a widening gap between policymakers’ optimism and Main Street’s anxiety.
Powell’s report painted a mixed picture. Real GDP rose a healthy 2.5 percent in 2024 but “edged down” in the first quarter as firms front-loaded imports before tariff hikes took effect. Even so, private domestic final purchases climbed at a 2.5 percent annual rate, supported by a rebound in business spending on equipment and intangibles. Payrolls grew by an average 124,000 per month through May, nudging the jobless rate to 4.2 percent—low by historical standards but no longer at rock bottom. Headline PCE inflation cooled to 2.3 percent year-over-year in May, yet the stickier core gauge still sits at 2.6 percent, above the Fed’s 2 percent target.
Despite those figures, the Federal Open Market Committee has kept its federal-funds target locked at 4.25 percent–4.50 percent since January and even slowed quantitative tightening in April. Powell warned lawmakers that this year’s tariff hikes are “likely to push up prices and weigh on economic activity,” adding that the Fed would act if a “one-time” price shock risked becoming entrenched. Whether officials can truly fine-tune that outcome remains debatable: history shows price controls, tariffs, and reactive rate moves often compound, rather than cure, inflationary pressures.
Consumers seem unconvinced that the policy mix is working. The Present Situation Index slid 6.4 points, while the Expectations Index plunged to 69.0—well below the 80 mark that has preceded past recessions. Only 29.2 percent of survey respondents still label jobs “plentiful,” and just 16.3 percent expect their incomes to rise. A record 57 percent now foresee higher interest rates over the next year, hinting that many households doubt the Fed’s “higher for longer” stance is finished. Although intentions to buy autos remain the strongest since December, plans to purchase homes or discretionary services are deteriorating.
Against that backdrop of policy paralysis and tariff-driven cost pressures, gold’s glimmer is hard to miss. The yellow metal’s brief sprint to $3,324—within a $23.7 intraday range—signals that investors continue to seek insulation from both inflation risk and monetary experimentation. Unlike fiat credit that can be conjured or paused at committee meetings, bullion doesn’t rely on anyone’s promise to pay.
With growth slowing, confidence sagging, and price pressures one tariff headline away from re-ignition, the Fed may have bought itself time—but not necessarily trust. As policy makers debate their next move, the market has already rendered a verdict: sound money still shines brightest when uncertainty rules.
