Federal Reserve Chair Jerome Powell recently spoke at the Thomas Laubach Research Conference, hosted by the Federal Reserve Board of Governors on May 15, 2025, in good ol’ Washington, DC. The event was probably pretty fancy, you know, with all the big shots in attendance. Powell, in his speech, made some predictions about interest rates in the long term, suggesting that they are likely to go up as the economy changes and policy remains uncertain. I mean, who really knows what’s going to happen, right?
Changes in the economy over the past five years have been significant, according to Powell. Inflation has been all over the place, prompting the Fed to make some pretty aggressive moves with interest rates. Despite inflation expectations mostly aligning with the Fed’s 2% target, Powell doesn’t think we’ll be seeing those near-zero rates again anytime soon. He mentioned something about higher real rates potentially being a result of more volatile inflation in the future. Sounds like a headache for the economy and central banks, doesn’t it?
The Fed kept its benchmark borrowing rate near zero for a whopping seven years after the 2008 financial crisis. Since December 2024, though, the overnight lending rate has been floating around 4.25%-4.5%, currently sitting at 4.33%. Powell’s been going on about these “supply shocks” lately, warning that changes in policy could make it tough for the Fed to balance employment and inflation. He didn’t bring up Trump’s tariffs in his recent speech, but he did mention how they could slow growth and ramp up inflation. Who really knows how that’s all gonna play out, right? I guess we’ll just have to wait and see.
Now, the Fed is looking into a five-year plan on how it’ll make decisions and communicate them to the public. Powell mentioned that they’ll be focusing on how they convey their expectations for the future, as well as looking back at ways to improve from the last review. Remember that whole “flexible average inflation target” thing from 2020? Yeah, that didn’t quite work out as planned with the whole pandemic mess. The new review will take into account how the Fed deals with “shortfalls” in its goals for inflation and employment. Powell also hinted at potential changes in how they communicate with the public, especially during times of economic uncertainty. I don’t know about you, but I’m curious to see how this all pans out.
In conclusion, Powell didn’t give a specific date for when the review will be completed, but he did mention it should be done in the “coming months.” Last time, he spilled the beans at the Fed’s Jackson Hole, Wyoming retreat, so who knows where he’ll drop the bomb this time. I don’t know about you, but I’ll be keeping an eye out for any updates on this rollercoaster ride of economic policy changes. Who knew interest rates could be so exciting?
