- Federal Reserve Chairman Jerome Powell emphasized the need for more evidence that inflation is easing before the central bank considers cutting interest rates.
- Powell stated that it’s too soon to say whether recent stronger-than-expected inflation readings represent more than just a temporary bump.
- The Fed chair reiterated that rate cuts are likely to be appropriate at some point this year, but decisions will be made on a meeting-by-meeting basis guided by incoming data.
Federal Reserve Chairman Jerome Powell said Wednesday that policymakers need more time to assess the trajectory of inflation before considering interest rate cuts. His remarks signal the central bank’s patient approach to monetary policy in the face of stronger-than-expected inflation readings so far this year.
Powell Emphasizes Need for More Evidence on Inflation
Speaking at a policy conference at Stanford University, Powell said it is too soon to determine whether recent inflation figures represent more than just a temporary bump. “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” he said.
The Fed chief noted that given the strength of the economy and progress on bringing down inflation to date, policymakers have the ability to let incoming data guide their decisions before taking action. “The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent on a sometimes bumpy path,” Powell added.
Markets Recalibrate Rate Cut Expectations
Powell’s remarks come after the Federal Open Market Committee voted at its March meeting to leave rates unchanged and emphasized in its statement the need for “greater confidence” on inflation before cutting. Markets widely anticipate rate cuts later this year but have had to adjust their expectations on the timing amid persistently high inflation readings.
Other Fed officials speaking this week, including Atlanta’s Raphael Bostic, San Francisco’s Mary Daly and Cleveland’s Loretta Mester, have echoed the central bank’s patient stance. Their comments have caused some volatility in markets as investors reprice their outlook for potential Fed rate cuts.
Powell Stresses Fed Independence
In addition to his comments on policy, Powell discussed the importance of the Fed maintaining its independence from political pressure. “Our analysis is free from any personal or political bias in service to the public,” he said.
Powell also reiterated the Fed’s limited role in addressing issues like climate change, saying “We are not, nor do we seek to be, climate policymakers.” His remarks come as the central bank faces demands from some to take a more active role in forcing banks to address climate risks.
Conclusion
Powell made clear that the Fed remains data-dependent and sees no urgency to loosen monetary policy despite inflation persisting above its 2% target. His emphasis on waiting for more evidence before rate cuts underscores the central bank’s patient approach as it monitors how quickly inflation is coming down. Markets will be watching closely for any signals from Powell and other Fed officials on when they may deem it appropriate to lower interest rates to support the economy.
