Fed Chair Powell says central bank doesn't 'need to be in a hurry' to lower interest rates further
Powell called the economy "strong overall" with a "solid" labor market and inflation that is easing but still above the Fed's 2% goal
Federal Reserve Chair Jerome Powell on Tuesday reiterated the central bank's commitment to bringing inflation down and signaled that policymakers aren't in a rush to push interest rates lower.
In remarks before the Senate Banking Committee, Powell called the economy "strong overall" with a "solid" labor market and inflation that is easing but still above the Fed's 2% goal.
With those conditions prevailing, he said the Fed doesn't need to move quickly to ease monetary policy.
"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. "We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment."
Powell's comments came in the first of two appearances this week on Capitol Hill. He speaks to the Senate Banking Committee on Tuesday then the House Financial Services Committee on Wednesday.
The remarks are largely in keeping with Powell's recent statements and those of his colleagues, who are digesting a number of fiscal and monetary dynamics that make for an uncertain environment.
Most prominently, President Donald Trump has launched an aggressive campaign to institute tariffs against the largest U.S. trading partners, in one sense to level the economic playing field and in another to enforce foreign policy goals against illegal immigration and drug smuggling, specifically fentanyl.
Powell did not mention any of that in his remarks but is expected to face questioning on tariffs and other issues from panel members.
Markets have interpreted the recent messaging as indications that the Fed will be on hold with rates, probably into the summer, after cutting its benchmark borrowing level by a full percentage point in the latter part of 2024.
Powell said the current policy stance, with the benchmark fed funds rate in a range between 4.25%-4.5%, as providing flexibility. The Federal Open Market Committee held the rate in place at its late-January meeting.
"We are attentive to the risks to both sides of our dual mandate, and policy is well positioned to deal with the risks and uncertainties that we face," he said.
Shortly after taking office, Trump said he would "demand" that interest rates come down "immediately." However, in subsequent remarks he said he agreed with the decision to keep rates in place, while Treasury Secretary Scott Bessent said the administration is more focused on seeing the 10-year Treasury yield move lower than on the Fed's actions, which more strongly influence shorter-term rates.
This story originally appeared on: CNBC - Author:Jeff Cox
