(Bloomberg) — Federal Reserve Chair Jerome Powell repeated that the US central bank isn’t in any rush to cut interest rates.
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“We don’t need to be in a hurry to cut,” Powell said Friday at an event at the San Francisco Fed.
Fresh inflation data released earlier is “pretty much in line with our expectations,” he said. But Powell reiterated it won’t be appropriate to lower rates until officials are confident inflation is on track toward their 2% goal.
“It’s good to see something coming in in line with expectations,” he said, adding that the latest readings aren’t as good as what policymakers saw last year.
The Fed’s preferred gauge of underlying inflation cooled last month after an even larger increase than previously reported in January, government data released Friday showed. The core personal consumption expenditures price index — which excludes volatile food and energy costs — rose 0.3% in February after climbing 0.5% in the previous month, marking its biggest back-to-back gain in a year.
Powell said officials expect inflation to continue falling on a “sometimes bumpy path,” echoing remarks he made following the Fed’s last policy meeting earlier this month.
Fed officials held short-term interest rates at a more than two-decade high at that meeting, and a narrow majority penciled in three rate cuts for 2024.
Powell said at the time that it would likely be appropriate to ease policy “at some point this year.” But he and other policymakers have made clear they’re in no rush given the underlying strength of the economy and recent signs of persistent price pressures.
Inflation Cooling
Inflation has eased substantially from a 40-year peak reached in 2022, decelerating at a particularly fast clip last year. That progress appeared to stall in January and February, with a pickup in consumer price growth.
Meanwhile, the US economy has remained resilient despite high interest rates. Inflation-adjusted consumer spending topped all economists’ estimates in February, and employers are still hiring workers at a robust clip. Data out earlier this week showed economic growth in the fourth quarter was stronger than originally thought.
Although Fed officials’ median projection for three rate cuts this year was unchanged from December, nearly half forecast two or fewer rate reductions in 2024. Most policymakers have said they want to see further evidence that inflation is coming down toward their 2% goal before making their first move, which investors now expect in June.
Powell said Friday an unexpected weakening in the labor market could warrant a policy response from Fed officials, but said he doesn’t see the possibility of a recession as elevated at this time.
Governor Christopher Waller, an early proponent of raising rates high and fast to contain price pressures, said Wednesday that disappointing inflation data from the start of the year means policymakers may need to keep rates elevated for longer than previously thought or even reduce the overall number of rate cuts.
Read More: Waller Says Fed Should Delay or Reduce Cuts After New Data
But Powell and his colleagues have also said they expect inflation progress to be bumpy, and don’t need to see it hit their target before they start lowering borrowing costs.
As inflation declines, elevated rates are putting more pressure on the economy, and some policymakers reason it may be appropriate to lower them soon to avoid unduly harming the labor market.
(Updates with additional Powell comments starting in fifth paragraph.)
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