Fed Chair Powell reiterates no rush on rate cuts, cites strong economy

Fed Chair Jerome Powell reiterated today that the US economy remains strong and the central bank won’t rush to cut interest rates, citing the need to ensure inflation continues to move toward its 2% target.

“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said in testimony prepared for the Senate Banking Committee.

The US economy expanded at a 2.5% rate in 2023, supported by resilient consumer spending, while the labor market remains solid with payroll gains averaging 189,000 per month over the past four months, Powell noted. The unemployment rate stood at 4% in January.

Inflation has “eased significantly” over the past two years but remains above the Fed’s target, with core personal consumption expenditure prices rising 2.8% in the 12 months through December, excluding food and energy costs. Total PCE prices increased by 2.6% during the same period.

“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” Powell said. “At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”

The Fed has held interest rates steady since July at 5.25% to 5.5% after raising them aggressively to combat inflation. Powell said the central bank would adjust its policy stance based on incoming data, the evolving outlook, and balance of risks.

This is a developing story.