The Fed lives uncertainty about the future of interest rates

He also noted that after a year of aggressive rate hikes, the Fed “can afford to look at the data and the changing outlook to make careful assessments.”

“We face uncertainty about the lagged effects of our tightening so far, and about the extent of credit tightening from the recent banking stress,” Powell said.

“So today, our guidance is limited to identifying factors we will watch as we assess the extent to which additional policy tightening may be appropriate to return inflation to 2%,” he noted.

“The risks of doing too much or doing too little are increasingly balanced, and our policy is adjusting to reflect that,” Powell said.

Looking ahead to the June 13-14 monetary policy meeting, “we have not made any decisions on the extent to which further policy tightening will be appropriate,” he remarked.

Fed officials remain undecided about their next decision, and Powell’s appearance on Friday was a moment that could have brought clarity. But the central bank will still receive important employment and inflation data in the coming weeks that could influence the debate.

But the Fed also faces other constraints. Regardless of the data, the bank is unlikely to raise rates if the political standoff over the federal debt ceiling remains unresolved.

If the result is a real US debt default, the central bank could even be pushed into emergency measures to ease the burden on the economy.