Wednesday’s rate cut from the Fed was “a closer call” compared to reductions in November and September, Jerome Powell said, speaking to reporters following the final FOMC meeting of 2024.

Asked by The New York Times‘s Fed reporter, Bloomberg veteran Jeanna Smialek, why the Fed should cut at all in 2025, Powell first explained Wednesday’s cut.

Although downside risks “do appear to have diminished,” the labor market’s still cooling, Powell said, before reminding investors that, as per his Jackson Hole speech in August, the Fed doesn’t think more cooling’s necessary to restore inflation to target.

As for inflation, Powell insisted the story’s “broadly on track,” as he put it. Yes, the 12-month prints are moving sideways, but that’s in part due to base effects, and housing services inflation, while vexingly stubborn, is coming down, however slowly.

Over the course of 45 minutes chatting with the press, Powell repeatedly tried to square the circle between a significantly higher inflation outlook in the SEP and projections for additional rate cuts, albeit at a slower pace.

The short version just says the Fed wants to draw a line under the labor market right where it is, and not chance any additional (let alone meaningful) cooling. Although the inflation outlook was marked higher for 2025, 2.5% core inflation would still represent progress, and as long as the disinflation narrative’s seen as intact, it’ll still be appropriate to move rates incrementally lower to neutral which, crucially, the Fed still believes is well below current Fed funds, even after another 10bps upward shift in the long run dot.

“We’re closer to the neutral rate,” Powell said, at one point, noting that’s a reason to slow the pace of cuts. “If somebody looked at these projections and said ‘Gee, this looks like it could be the last rate cut for some time’ would they be mistaken to infer that?” Nick Timiraos wondered. Powell said they would — be mistaken, I mean. It’s appropriate to slow the pace, not necessarily to declare an end to the cutting cycle, he told Timiraos, even as he later suggested the lion’s share of the policy adjustment’s probably done.

Surprisingly, Powell wasn’t interrogated too aggressively about Donald Trump and the incoming administration’s policies. He did say that some officials went ahead and ran a few modeling exercises to determine what the impact of tariffs might be, but he was very adamant that it’s too early for the Fed to incorporate any such estimates into the policymaking process. It’s “not unlike driving on a foggy night or walking into a dark room with furniture,” he mused.

He also went out of his way — or it felt like it to me — to dispense with the idea that the upward revisions to the inflation outlook were solely down to the election outcome. Rather, the Fed was simply responding to the incoming data and what it suggests about the likely trajectory of consumer price growth, Powell said.

Asked by Steve Liesman if the “recalibration” phase is over now, a reference to the lingo the Committee used in and around the September jumbo cut, Powell laughed. “We’re not renaming the phase yet [but] we are in a new phase,” he said. “We’re significantly closer to neutral but we think where we are is still meaningfully restrictive.”

As for the overall economic outlook, Powell was sanguine. Frankly, it’s hard to blame the guy. There’s “no reason to think a downturn is any more likely that it usually is,” he assessed. “The outlook is still pretty bright for our economy.”

Asked if it’s possible the Fed might hike rates in 2025, Powell wisely hedged. “You don’t rule things completely in or out in this world, but that doesn’t appear to be a likely outcome,” he said.