Powell: Federal Reserve on Track to Cut Rates This Year With Inflation Slowing and Economy Healthy
Powell indicates the Federal Reserve's intention to reduce interest rates this year due to slowing inflation and a robust economy.
In an interview broadcast on Sunday night, Federal Reserve Chair Jerome Powell stated that the central bank remains committed to a plan to cut interest rates three times this year, with the first cut expected as early as May. Powell, speaking on CBS's "60 Minutes," emphasized the strength of the nation's job market and economy, dispelling concerns about an impending recession. He expressed optimism, stating, "I do think the economy is in a good place, and there’s every reason to think it can get better."
Powell's remarks echoed statements made at a news conference earlier in the week after the Federal Reserve decided to maintain its key interest rate at approximately 5.4%, a 22-year high. The Fed has raised this rate 11 times since March 2022 to combat inflation, resulting in increased costs for consumer and business loans.
While Powell acknowledged that the next Fed meeting in March might be too soon for a rate cut, he hinted that the reduction could happen in May or June. With inflation gradually cooling, most of the Fed's policy-setting committee members agree that rate cuts are warranted in the coming months, Powell noted in the "60 Minutes" interview. Lowering the central bank's key rate would reduce costs for mortgages, auto loans, credit cards, and other forms of borrowing.
Powell attributed the inflation surge in 2021-2022 to pandemic-related disruptions, such as shifts in consumer spending from services to goods. He acknowledged that the Fed misjudged the duration of the resulting inflation and conceded that the central bank should have raised its key rate sooner.
Despite signalling a potential rate cut, Powell emphasized the need for further evidence that inflation is under control. He stated that the central bank is not seeking better data but a continuation of the positive economic data received. Powell, in a news conference, praised the U.S. economy's strength and the slowdown in inflation without the expected rise in unemployment and weak growth.
While some Fed officials have expressed caution about rate cuts, particularly after unexpectedly strong job growth in December, Powell's overall message remains cautious optimism regarding the economic outlook.