Federal Reserve Chairman Jerome Powell commented on Friday that the latest U.S. inflation data is “in line with what we expect,” maintaining the central bank’s benchmark for rate cuts this year. He made a comment like this.
Chairman Powell said the personal consumption expenditure price index data released Friday was “what we expected,” and even though the numbers don’t indicate the same slowdown as last year, “I don’t think we’re overreacting.” I don’t think so.”
In a speech at the San Francisco Fed, Chairman Powell said last month’s numbers were “not as low as most of the good numbers we had in the second half of last year, but they are clearly in line with what we would expect.” . There he was interviewed by Kai Ryssdal of public radio’s “Marketplace” show.
Chairman Powell’s comments are consistent with remarks made after last week’s Fed policy meeting, where higher-than-expected inflation in January and February pushed inflation to 2% this year, the central bank’s target. He said that his view remains that the market will continue to decline. .
The PCE price index rose at an annual rate of 2.5% in February, up from 2.4% the previous month, according to government data. The figure, which excludes volatile food and energy prices, rose 0.3% month-over-month, slightly lower than Powell expected last week when he said core inflation would be “well below” 0.3% in February. exceeded.
Still, Powell said the February report did not undermine the Fed’s fundamental outlook.
Economists noted that some details of the PCE data showed improvement in aspects of inflation that the Fed considers important, even though key statistics showed little progress in the first two months of the year. .
Last week, the Federal Reserve kept its policy overnight rate stable in the range of 5.25% to 5.50% and narrowly reaffirmed its baseline forecast that the rate would fall by 0.75 percentage points by the end of this year.
The Fed is expected to keep interest rates unchanged at its policy meeting from April 30 to May 1, as it has since last July.
By then, policymakers will receive March inflation and jobs data, as well as initial estimates of gross domestic product (GDP) growth for the first three months of the year.
Fed officials have been careful to say they don’t place too much weight on single-month data, but they could have an even bigger impact if the March data confirms or contradicts expected employment and wages. be. Slower growth and housing inflation.
Economists polled by Reuters expect continued strong employment growth in next week’s March jobs report, with an increase of 200,000 jobs, but annual wage growth of 4.1%. This is expected to reach the lowest pace since June 2021.
Powell has had to adjust his expectations for interest rate cuts to begin this year in recent weeks after data showed that the improvement in inflation numbers has slowed since the start of the year.
He said on Friday that “we need to see further” developments in inflation before cutting rates. “The decision to start cutting interest rates is a very important one. The economy is doing well right now, the labor market is doing well. And inflation is coming down. can be done carefully.”
