Federal Reserve Chairman Jerome Powell testifies at a hearing of the Senate Committee on Banking, Housing, and Urban Affairs entitled “Semi-Annual Monetary Policy Report to Congress” at the Dirksen Building on Thursday, March 7, 2024.
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Federal Reserve Chairman Jerome Powell said on Thursday that if inflation signals cooperate, a rate cut may not be too far away.
Speaking to the Senate Banking Committee, the central bank leader did not provide a firm timetable for when easing would be implemented, but noted that day could come soon.
“We are waiting to become more confident that inflation is sustained at 2%. When we do gain that confidence and are not far away from it, then we should start to relax the level of restrictions.” Powell responded to questions about interest rates and inflation Shi said. He said the interest rate cut was to keep the Fed from “letting the economy go into recession rather than normalizing policy when the economy returns to normal.”
Powell’s speech came amid sharp swings in financial market expectations for Fed policy.
At the beginning of this year, futures traders were betting that the Federal Reserve would start cutting interest rates in March and continue cutting interest rates until six or seven times this year. The expectation now is for the first rate cut to come in June, followed by four more cuts totaling a full percentage point by the end of 2024.
Recent inflation data suggests the pace of price increases continues to slow, although consumer prices were higher than expected in January, unnerving markets. Still, Powell noted in congressional testimony this week that inflation is falling, although not yet to the point where the Fed is ready to cut interest rates.
“I think we’re in the right place,” Powell said of the current policy stance.
