• Powell rejected the idea that there are simmering problems - including underlying labor market weakness - caused by too-high interest rates that haven't fully revealed themselves.
• And three years into the Fed's war on post-pandemic inflation, its leaders do not believe they have fully won - even before accounting for the likelihood of more tariff-driven inflation showing up in the numbers in the months ahead.
• The upshot: Don't count on lower interest rates unless clearer evidence emerges that elevated rates are doing meaningful damage to the economy.

State of play: A dozen or so times in Powell's news conference Wednesday, he deflected the notion that the economy is weaker than it appears due to elevated interest rates.

• "The economy is not performing as though restrictive policies were holding it back," Powell said at one point. He added later that "if you look at the labor market, what you see is, by many, many statistics, the labor market is ... still in balance."
• He seemed prepared for the possibility that headline job growth will falter in the months ahead as immigration policy causes less labor supply - arguing that against that backdrop, it's more important to watch the unemployment rate, which has been steady this year.

Driving the news: New data out Thursday morning supports Powell's view of underlying stability and ongoing inflation risk.

• Personal income and outlays each rose a solid 0.3% in June, per the Commerce Department. But the Personal Consumption Expenditures Price Index favored by the Fed ticked up to 2.6% over the last 12 months, from 2.4% in May.
• The number of Americans filing unemployment insurance claims remained low last week, at 218,000, the Labor Department said.

The other side: Two Fed governors dissented Wednesday, the first time that has happened since 1993. In a speech two weeks ago, one of them, Christopher Waller, laid out his case for cutting rates - and emphasized subtle warning signs that monetary policy is too tight.

• Waller said that "while the labor market looks fine on the surface, once we account for expected data revision, private-sector payroll growth is near stall speed, and other data suggest the downside risks to the labor market have increased."
• He said that based on current conditions, the Fed's policy stance should be neutral - neither stimulating nor slowing activity - which implies rates around 3%, not the current level just below 4.5%.

Of note: Trump administration officials are also arguing for interest rate cuts, arguing that the economy is booming and that this means rate cuts are justified.

• That's the opposite of how traditional monetary economics would recommend a central bank respond to a boom.