Fed chair Powell to Congress: Don't expect rate cuts imminently

Fed chair Powell to Congress: Don't expect rate cuts imminently


Federal Reserve Chair Jerome Powell informed lawmakers on Wednesday that the central bank anticipates reducing interest rates "at some point this year," but only once policymakers are confident they have successfully managed inflation.

This decision is significant because the Fed is evaluating the risk of lowering rates prematurely, which could reignite inflation. Conversely, maintaining borrowing costs too high could unnecessarily harm the economy, which has thus far avoided a recession.

Powell stated, "If the economy progresses as expected, it will likely be appropriate to begin easing policy restraint at some point this year." However, he emphasized the uncertain economic outlook and the need for ongoing progress toward the Fed's 2% inflation target.

The Fed's policy committee does not anticipate reducing the target range until it is more certain that inflation is steadily moving toward 2%.

Recent data indicates that achieving the Fed's 2% inflation target may take longer than initially expected. As a result, Fed officials have emphasized the need for further evidence that inflation is abating before deciding to cut interest rates.

In response to a question, Powell indicated that the Fed can afford to wait longer before deciding on rate cuts, citing the strength of the economy and the labor market.

Regarding a contentious bank regulatory proposal released last year, Powell acknowledged the concerns raised and expressed confidence that there would be significant revisions to the proposal. He stated that a re-proposal was a plausible option and expressed confidence that the final version would garner broad support.