Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on the “Semiannual Monetary Policy Report to Congress” at the Dirksen Building, Thursday, March 7, 2024.
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Federal Reserve Chairman Jerome Powell on Thursday indicated that interest rate cuts may not be far off if inflation signals cooperate.
In comments to the Senate Banking Committee, the Fed chairman did not provide a precise timetable for when he sees easing, but indicated that day could come soon.
“We're waiting for more confidence that inflation is moving steadily around 2%. When we get that confidence, we're not far from that, and it would be appropriate to start pulling back on the level of restraint.” Powell responded to a question about rates and inflation. “When the economy returns to normal, rather than normalizing policy, the central bank will not push the economy into recession” so there will be cuts, he said.
Powell spoke at a time when financial markets have fluctuated significantly in their expectations for Fed policy.
At the start of the year, futures traders were betting that the Fed would start in March and continue until it cuts six or seven times this year. The first cut, which will be a full percentage point with four reductions by the end of 2024, will come in June.
Although the consumer price index rattled markets in January when it came in higher than expected, recent inflation data indicated that the pace of price rises continued to slow. However, Powell noted in congressional testimony this week that inflation is progressing less, though the Fed is not ready to cut.
“I think we're in the right place,” Powell said of the current policy stance.
