Federal Reserve Chair Jerome Powell held firm on monetary policy, calling the central bank's current stance “modestly restrictive” and reiterating that no decision has been made about a rate cut in September.

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On Wednesday, the Federal Reserve held interest rates steady at 4.25%-4.50% as expected, yet two members broke ranks to support a rate cut, marking the most divided Fed meeting in over three decades.

Powell Doesn’t Concede On September Rate Cut

Speaking after the July Federal Open Market Committee meeting, Powell said inflation remains "a bit above 2%," even when excluding the recent tariff-driven spike in goods prices.

Despite softening in some economic indicators, Powell emphasized that policy must remain tight enough to prevent those price increases from becoming embedded.

Markets and the Trump administration have been pressuring the Fed to begin cutting interest rates this fall. But Powell resisted those calls, stressing that two more rounds of jobs and inflation data will arrive before the next meeting.

"We have made no decisions about September," he said. "We don't do that in advance."

Powell explained that the Fed is trying to time its next move efficiently: "If we move too soon, we may not finish the job on inflation. If we move too late, we risk unnecessary damage to the labor market."

Asked whether current data would justify a cut in September if trends hold steady, Powell declined to answer directly. "We're going to need to see the data," he said. "It can go in many different directions."

Tariff Effects Are Real—But Still Evolving

Powell acknowledged that higher tariffs, particularly those imposed earlier this year, are beginning to filter through to consumer prices. The Fed estimates that around $30 billion in tariff revenue is being collected monthly, much of which is now appearing in goods inflation. Powell cited the June Consumer Price Index report as evidence.

"Companies feel that they have every intention of putting this through to the consumer," Powell said. "But they may not be able to in many cases."

While he called it a "reasonable base case" that these price increases are a one-time shift, Powell warned that the inflationary impact could still prove more persistent—a risk the Fed is monitoring closely.

Labor Market Holding, But Under Pressure

Despite ongoing strength in headline numbers, Powell admitted the labor market is "in balance" largely because both labor demand and supply are slowing in tandem. Private-sector job creation has decelerated in recent months, though unemployment remains low at 4.1%.

"There are downside risks to the labor market," Powell said. "It's worth paying close attention."

Market Reactions: Stocks Fall, Dollar Rallies, Copper Suffer Historic Fall

Markets swung lower as Powell struck a cautious tone on interest rates, dashing hopes for a near-term cut. Wall Street’s rate-cut bets for September fell to 45%, down from 68% immediately after the Fed's July policy statement.

The S&P 500 declined 0.5%, on pace for its third straight loss—its longest losing streak since late April. Small caps, which are more sensitive to interest rates, underperformed, with the iShares Russell 2000 ETF (NYSE:IWM) down 1%.

The U.S. dollar index surged 1%, extending its rally to five consecutive sessions, the strongest five-day gain since mid-2022, as traders unwound short positions.

Copper markets saw unprecedented volatility. Prices plunged 19.4%, marking the steepest one-day drop since the metal began trading on financial markets in 1988. The selloff followed President Donald Trump's tariff adjustments, which excluded refined copper, prompting a reversal of pre-tariff hoarding strategies.

The updated tariff plan will apply to semi-finished copper goods, such as wires and pipes, but will exclude ore, cathodes, and concentrates, which account for the majority of U.S. copper imports. Traders had been front-loading shipments ahead of Friday's 50% levy, fueling a rapid unwind.

Other metals also suffered losses. Gold fell 1.6% to $3,272 an ounce, hitting a one-month low. Silver dropped 3.4% to $36.85, while platinum sank 7.4% to $1,290.

Crypto followed suit: Bitcoin (CRYPTO: BTC) lost 1.7% to $116,000 and Ethereum (CRYPTO: ETH) dipped 2% to $3,719.

Copper On A Free Fall After Trump’s Tariff Correction

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Image created using artificial intelligence via Midjourney.