What the Markets Wants from Jerome Powell’s Next Fed FOMC Update

Just over a week ago, Jerome Powell, the Federal Reserve Chairman, described the economy as robust, the job market as "reliable," and suggested that policymakers were in a good spot to pause and seek more certainty before adjusting interest rates. That view already feels outdated. If Powell sticks to this script at his press conference following Wednesday’s Fed meeting, it’s unlikely to impress the S&P 500 or calm Wall Street’s nerves. Investors are on edge, and they’ll be looking for fresh signals.

All eyes will be on the Federal Reserve’s policy statement, set for release at 2 p.m. ET on Wednesday, as analysts hunt for any slight tweak in how the Fed views the economy. There’s also chatter that the Fed might pause its balance sheet reduction, at least for now. At the same time, updated quarterly forecasts—also due at 2 p.m.—could adjust the outlook for the Fed’s main interest rate and inflation. Still, it’s Powell’s 2:30 p.m. briefing that’s likely to set the tone for markets, with investors hanging on his every word for clues about what’s next.

In a speech on March 7 at the University of Chicago, Powell highlighted that the incoming Trump administration is gearing up for major shifts in trade, immigration, fiscal policy, and regulation. He stressed that the combined impact of these changes will shape the economy and guide the Fed’s approach. But his claim that the Fed can afford to wait for these policies to crystallise might not hold up. Tariffs, spending reductions, and job cuts are already starting to pile up, with a potential big leap on April 2 when Trump’s team rolls out tailored reciprocal tariffs aimed at balancing trade. Meanwhile, Trump’s tax cuts could take months to materialise—Republican lawmakers are still aligning, and some suggest budget talks might stretch into late summer due to the complexity of tax policy. Uncertainty also looms over budget cuts, especially with possible pushback against slashing Medicaid. This muddies the waters on how forceful the fiscal package will be, leaving the Fed—and investors—waiting longer for clarity.

Recent Fed meeting notes from late January hinted at pausing the reduction of its balance sheet—known as quantitative tightening—until the debt ceiling is sorted. Currently, the Fed lets up to £19 billion in Treasurys and £27 billion in mortgage securities mature each month without reinvesting, unwinding its pandemic-era expansion. With the Treasury now dipping into cash reserves instead of borrowing more, halting this runoff could stretch that cash further. As for rate cuts, markets see almost no chance (1%) of a move this week, per CME Group’s FedWatch tool. The odds for May 7 have dropped to 22% from 48% after recent inflation data showed core PCE— the Fed’s key gauge—likely rising to 2.8% from 2.6%. Looking ahead, there’s a 70% chance of a cut by June 18, possibly before Trump’s tax plans kick in. For 2025, markets are split on whether cuts will total 50 or 75 basis points, against December’s Fed projection of 50.

The S&P 500 rose 1.1% in Monday afternoon trading, adding to Friday’s 2.1% surge that pulled it out of a 10% correction. Even so, it’s still 8.2% off its February 19 peak. If the job market softens further, investors will want Powell to signal readiness to lower rates—whether spurred by incoming tax cuts or that uptick in core inflation. After each trading day, checking RealisedGains’ market roundup can help you stay on top of the stock market’s direction and what it means for your next move.