Powell Says Fed Has Time To Let Data Inform Policy Decisions

Federal Reserve Chair Jerome Powell reiterated during remarks at Stanford University on Wednesday that the central bank is not in a hurry to begin lowering interest rates.

Powell pointed to higher inflation data over January and February as a reason for the Fed to be cautious but acknowledged it is “too soon to say whether the recent readings represent more than just a bump.”

“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” Powell said.

He added, “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”

Nonetheless, Powell said he continues to believe rates are likely at their peak for this tightening cycle and noted most Fed officials see it as likely to be appropriate to begin lowering rates at “some point this year.”

The Fed chief described the outlook as “quite uncertain” and suggested there are risks to both cutting rates too soon or too late.

“Reducing rates too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2 percent,” Powell said. “But easing policy too late or too little could unduly weaken economic activity and employment.”

He continued, “As progress on inflation continues and labor market tightness eases, these risks continue to move into better balance.”

Calling monetary policy well positioned to confront either of these risks, Powell stressed interest rate decisions will be made “meeting by meeting.”

The Fed’s next monetary policy meeting is scheduled for April 30-May 1, with the central bank widely expected to leave interest rates unchanged.

The outlook for the Fed’s June meeting is more uncertain, as CME Group’s FedWatch Tool currently indicates a 61.0 percent chance of a quarter point rate cut but a 36.9 percent chance rates will remain unchanged.

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