Federal Reserve Chairman Jerome Powell told U.S. lawmakers on Wednesday that he still expects a rate cut later this year, but added that progress in lowering inflation is “not guaranteed.”
“If the economy continues broadly as expected, it would be appropriate to begin tapering policy restraints at some point this year,” Powell said in preparation for a House Financial Services Committee hearing.
“However, the economic outlook remains uncertain and continued progress towards the 2% inflation target is not guaranteed.”
Still, Powell told committee members: “There is no evidence, and there is no reason to think, that the U.S. economy is in recession or is at any short-term risk of going into recession.”
Far from that, Powell said the economy is growing and the current 3.7% unemployment rate remains low, while inflation continues to fall to the 2% target – achieving the hoped-for soft landing. He said the Fed is on a “good trajectory.”
Mr. Powell’s commentary is similar to the language he and his colleagues have used to characterize the current state of the economy, with January’s consumer price index (which tracks changes in the cost of daily life) showing that inflation The rate rose 3.1%, higher than expected. Goods, services and interest rates are at his highest levels in 22 years.
He noted that inflation has “substantially eased” since hitting a 40-year peak in 2022, making it difficult to cut rates too early, especially in an election year that will see him face Democratic incumbent President Joe Biden. He said there was a risk of allowing inflation to accelerate again. And former Republican President Donald Trump takes shape.
House Financial Services Committee Chairman Patrick McHenry (R-North Carolina) reiterated that “we are in the year of politics,” questioned Powell about the central bank’s plans to cut interest rates, and said all the Fed’s actions should be viewed through a “lens.” He pointed out that it would be seen through. Results of the presidential vote in November.
A rate cut “really depends on where the economy is going. Chairman Powell is focused on maximum employment and price stability and future data that will impact the outlook, and those are the things we will be looking at.”
He said the Fed “wants to see more data that supports and provides more confidence that inflation is falling sustainably to 2%” before cutting rates.
In addition to impacting the cost of living for budget-conscious voters, keeping monetary policy tight for too long could undermine the continued expansion of the U.S. economy, which has held steady at less than 4% unemployment for the past two years. May cause damage.
Chairman Powell remains reluctant to say when monetary policy will be eased, and officials say the benchmark federal funds rate, which remains in the 5.25% to 5.5% range at its highest level, remains He reiterated that “more confidence” was still needed that inflation would continue before lowering the rate. It’s been more than 20 years since July.
For lawmakers holding Wednesday’s hearing, that means interest rates on mortgages, credit cards and small business loans will remain high.
by Federal Reserve Bank of New YorkHousehold debt soared to $17.5 trillion in the last three months of 2023.
Credit card debt accounted for much of this increase, as delinquencies increased by $50 billion to $1.13 trillion in the fourth quarter, and mortgage balances increased by a staggering $112 billion to $12.225 trillion. It was the cause.
In addition, auto loan balances increased by $12 billion to $1.61 trillion, continuing the growth trajectory since 2011, the Fed announced.
Recent data has shed little light on the direction of the economy and inflation, but Wall Street is widely expecting one of three rate cuts expected this year to begin in June.
“I’ve been very cautious in my comments about the overall health of the U.S. economy. And from an inflation perspective, we’re not there yet,” Powell said at Ladenberg Thalmann Asset Management in New York. said Phil Brancato, chief executive officer.
“His comments will once again confirm the narrative that the Fed is not yet ready to cut.”
The surprisingly resilient job market is attributed to persistently high inflation.
According to the Labor Department’s latest jobs report released in January, U.S. employers added a whopping 353,000 jobs that month, far exceeding economists’ expectations.
“The Fed can afford to keep raising rates until the labor market starts to crack,” Jamie Cox, managing partner at Virginia-based Harris Financial Group, told the Post.
Comes with post wire.
