The FOMC does not want to cut rates and then be forced to raise them again.
federal reserve Chairman Jerome Powell He said the U.S. central bank is on track to cut interest rates this year as long as inflation continues to decline.
In an interview with CBS’ “60 Minutes” that aired Sunday night, Fed officials warned that cutting rates too soon risks reigniting inflation and that cutting rates too late could weigh on the economy. He said he is trying to balance the risks between the two.economy and maybe cause a recession.
“There is no easy, simple, obvious path,” Powell said. “We have to balance the risk of acting too soon or too late. And there are different risks. We think the economy is in a good position. Inflation is down. We just want to have a little bit more confidence that inflation is coming down.” We will continue to work towards the 2% target in a sustainable manner. ”
Fed leaves interest rates unchanged, indicating it is not ready to start cutting rates
Federal Reserve Chairman Jerome Powell speaks at a press conference about interest rates, the economy, and monetary policy measures at the Federal Reserve Building in Washington, DC, June 15, 2022. (Photo by OLIVIER DOULIERY/AFP via Getty Images/Getty Images)
For the fourth consecutive meeting, the Federal Open Market Committee voted to keep interest rates unchanged at 5.25% to 5.5%, the highest level in 22 years. Policymakers also left the door open to a rate cut this year, but Powell told reporters at a post-meeting press conference that a March rate cut was unlikely.
The Fed chief reiterated that message on Sunday, saying the “time is right” to cut interest rates, but said it was “unlikely that the committee will reach that level of confidence before its March meeting in seven weeks.” .
Most investors now expect the Fed to start lowering rates in May or June.
meanwhile inflation has subsided Latest data from the Department of Labor shows that although it has risen significantly in recent months, it is still 3.4% higher than the same period last year.
The Fed’s fight against inflation is weighing heavily on middle Americans.
Policymakers have sharply raised interest rates over the past two years, approving 11 hikes in hopes of curbing inflation. cool the economy. In just 16 months, interest rates rose from near zero to more than 5%, marking the fastest pace of tightening since the 1980s.
Rising interest rates tend to raise interest rates on consumer and business loans, forcing employers to cut spending and slowing the economy. Rising interest rates have pushed the average interest rate on a 30-year mortgage above 8% for the first time in decades. Borrowing costs for everything from home equity lines of credit to auto loans and credit cards have also skyrocketed.
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However, the rapid rise in interest rates has not stopped consumers from spending and businesses from hiring.
The labor market continues to move at a healthy pace; Employers added 353,000 people New hires in January were almost twice as many as economists expected. The number of job openings remains high, and the unemployment rate continues to hover around 3.7%.
“Our economy is in good shape. Growth is at a steady pace and the labor market is strong, with an unemployment rate of 3.7%,” Powell said. “We feel that when the economy is doing so well, we can approach the question of when to start cutting interest rates in a measured manner. I would like to confirm.”
