Powell's firm message.. A strong American economy faces the inflation battle 🇺🇸

A few days after Federal Reserve Chair Jerome Powell’s speech, the market has begun to decode the message he sent to investors and economists. The takeaway is clear: the U.S. economy remains solid, but stubborn inflation is constraining its future decisions.

Solid Foundation but Challenges on the Horizon

Powell confirmed in his speech that the U.S. economy still maintains a strong and resilient stance, as recent economic data showed significant improvement since the last meeting. This solid foundation reflects a strong labor market and stimulated economic activity, but the picture is not entirely perfect.

Inflation remains Powell’s primary concern. After rising to 3% according to the latest data, he described it as “still posing a real threat” to economic stability. This contradiction— a resilient economy paired with persistent inflation— defines the trajectory of upcoming monetary policy.

Monetary Policy in a State of Cautious Waiting

Regarding interest rates, Powell signaled clearly that the Federal Reserve prefers stability and steadiness in the near future. Flexibility is the key word in the current Fed approach— decisions will be made “based on live data” without a predetermined path.

Notably, Powell pointed out that the rate cuts implemented by the central bank last year (2025) have positioned monetary policy to handle current developments effectively. However, inflation limits available options, making it highly unlikely that we will see new sector cuts soon.

The Threat of a Government Shutdown Looms

Powell added another layer of concern when discussing the government shutdown. The negative economic impacts of this shutdown are expected to become evident during the current quarter, which could increase pressure on policymakers and monetary authorities.

Markets Digest the Message

Powell’s firm message has had a limited impact on markets so far. Bitcoin is trading near $70,420, up 1.12% in 24 hours, while Ethereum has slightly declined by 0.68% to reach $2,070. Gold (PAXG) has shown relative stability, rising 0.14% to $5,010.

Summary: The Fed is in a “cautious watch” position. A strong and resilient U.S. economy prevents a recession, but stubborn inflation prevents any move to cut rates at this time. This delicate balance may explain the relative calm in the markets.