Federal Reserve Chairman Jerome Powell on Wednesday said the central bank still expects to lower its benchmark interest rate before the end of the year, but warned that continued progress in inflation is “not guaranteed.”
As U.S. lawmakers prepare to face voters fed up with inflation, Chairman Powell said in prepared remarks to the House Financial Services Committee that “if the economy performs broadly as expected, there is a possibility that policy restraint will be implemented at some point this year.” It would be appropriate to start scaling back.” In a tumultuous year of presidential elections.
“However, the economic outlook is uncertain, and continued progress toward the 2% inflation target is not guaranteed,” Powell said, adding that recent interest rates have been cut too quickly and there is a risk that inflation will accelerate again, and monetary policy He pointed out that there is a risk of maintaining both. Policies have been too tight for too long, damaging the ongoing economic expansion that has kept unemployment below 4% for two years.
Powell said inflation has “eased significantly” since hitting a 40-year high in 2022, but that policymakers still fear continued declines in inflation “further” before cutting rates. He pointed out that “confidence” is necessary.
Recent data has shed little light on the direction of the economy and inflation, with some analysts expecting price pressures to steadily ease, others expecting inflation to persist, and investors looking at the economic outlook. We expect rate cuts to begin in June, a key decision that will shape the landscape. During the election rematch between incumbent Joe Biden and former President Donald Trump.
Powell’s testimony comes at a time when inflation is now within range of the Fed’s 2% target by any measure, and at a time when the economy is performing unexpectedly well.
The Federal Reserve has kept its policy interest rate at 5.25% to 5.5% since July, the highest level in more than 20 years, but overall financial conditions have eased and asset prices have risen on expectations for Fed rate cuts. This could lead to inflation. It is difficult to suppress and strengthen the argument that interest rate cuts will be slower than expected.
