Federal Reserve Chair Jerome Powell reiterated that the US central bank isn’t rushing to cut interest rates, emphasizing the need for more evidence that inflation is under control. Powell stated that the strong pace of economic growth and a robust labor market give policymakers the confidence to wait for inflation to decrease before considering rate cuts.
Investors are now speculating that the Federal Reserve may implement its first rate cut in June. However, Powell’s comments suggest that the Fed remains cautious and will assess incoming data before making any decisions.
Recent inflation data, released earlier, showed that the Fed’s preferred gauge of underlying inflation cooled in February but remains above the target of 2 percent. Powell noted that inflation is expected to continue falling on a “sometimes bumpy path.”
Despite the strong economy, Powell emphasized that the possibility of a recession is not currently elevated. However, he stated that unexpected weakness in the labor market could prompt a policy response from the Fed.
Fed officials held short-term interest rates steady at their last policy meeting, with a majority projecting three rate cuts for 2024. Powell has indicated that it would likely be appropriate for the Fed to ease policy “at some point this year,” but policymakers are proceeding with caution due to the economy’s underlying strength and signs of persistent price pressures.
Inflation has eased substantially from its peak in 2022 but experienced a slight pickup in January and February. The US economy has remained resilient, with strong consumer spending and robust job growth. However, some policymakers have suggested that disappointing inflation data may require the Fed to keep rates elevated for longer than anticipated.
Overall, the Fed remains data-dependent and will closely monitor inflation trends before making any decisions on interest rates.
Sources Of Information: Business Standard
