Powell: Fed needs ‘greater confidence’ before cutting rates

Federal Reserve Chairman Jerome Powell told House members on Wednesday that the Fed is not yet confident that inflation is contained enough to start cutting interest rates to stimulate the economy.

In prepared remarks, Powell told the House Financial Services Committee that the central bank’s rate-setting committee would “lower the target range until we have greater confidence that inflation is on a sustained path toward 2%.” I have no intention of doing so.”

Wall Street has been watching with bated breath as central banks begin to cut interest rates, which are expected to ease borrowing costs and have a stimulating effect on business activity within the economy.

This could provide political capital for the Biden administration in the run-up to the 2024 election, as financial markets soar and funding costs fall, impacting everything from mortgage rates to business loans.

The Fed is also wary of leaving interest rates too high for too long, potentially pushing the economy into recession.

So while Democrats have supported lowering rates, Republicans have accused the Fed, a politically independent agency, of playing politics.

“I think [Powell is] If he lowers interest rates, he’ll probably do something to help Democrats,” former President Trump told FOX Business Network in February.

“It looks to me like he’s probably trying to lower interest rates to get people elected, but I don’t know.”

Trump, who appointed Powell as Fed chair in 2017, frequently sought to pressure the central bank to lower interest rates as president to support his political goals.

Inflation has declined over the past year and a half, from a high of nearly 9% in June 2022 to an annualized rate of 3.1%. consumer price index For the past few months, the index has resisted an eventual decline towards 2%.

Although the overall decline continues, Unemployment rate It remains near record lows as the inflationary effects of pandemic shutdowns and economic stimulus measures fade.

Progressive groups say this suggests the Fed’s rate tightening cycle was unnecessary and caused undue stress on the economy.

“After 19 months of falling prices from their peak and more than two years of historically low unemployment, it’s clear that mass unemployment was not necessary to bring inflation down. “The Fed’s rate hike campaign was deeply flawed,” Rakeen Mahboud, an economist at the progressive think tank Groundwork Collaborative, said in a statement.

“Congress must ask Chairman Powell tough questions about why he hasn’t reversed course and moved to lower rates,” he said.