Federal Reserve Chairman Jerome Powell testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing titled “Semiannual Monetary Policy Report to Congress” in the Dirksen Building on Thursday, March 7, 2024.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Federal Reserve Chairman Jerome Powell indicated Thursday that interest rate cuts may not be too far away if inflation signals cooperate.
In his remarks to the Senate Banking Committee, the central bank chief did not provide a specific timeline for when he sees easing occurring, but indicated that day could come soon.
“We are waiting to become more confident that inflation is moving sustainably at 2%. When we get this confidence, and we are not far from it, it will be appropriate to start reducing the level of restrictions.” Powell said in response to a question about interest rates and inflation. He said the cuts would be so that the Fed doesn't “push the economy into recession instead of normalizing policy as the economy returns to normal.”
Powell spoke at a time when financial markets have swung wildly in their expectations of Fed policy.
At the beginning of the year, futures traders were betting that the Fed would start in March and continue to cut interest rates six or seven times this year. Expectations now are that the first cut will come in June, with four cuts totaling a full percentage point by the end of 2024.
Inflation data recently indicated that the pace of price increases is continuing to slow, although the CPI shook markets when it came in higher than expected for January. However, Powell noted in his testimony to Congress this week that inflation is trending downward, though not yet at the point where the Fed is willing to reduce inflation.
“I think we're in the right place,” Powell said of the current policy stance.
