Federal Reserve Chairman Jerome Powell testifies at a Senate Banking, Housing and Urban Affairs Committee hearing entitled “Semi-Annual Report on Monetary Policy to Congress” at the Dirksen Building on Thursday, March 7, 2024.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Federal Reserve Chairman Jerome Powell on Thursday noted that interest rate cuts could be in the offing if inflation signals are consistent.
In his address to the Senate Banking Committee, the central banker did not give a precise timetable for when he believes easing will occur, but said that day could come soon.
“We are waiting to gain more confidence that inflation is moving sustainably at 2%. Once we have that 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 rates and inflation. He said the cuts would be made to ensure the Fed “isn’t pushing the economy into recession, rather than normalizing policy as the economy returns to normal.”
Powell spoke at a time when financial market expectations for Fed policy have been significantly shaken.
At the start of the year, futures traders were betting that the Fed would start in March and continue until it cut rates six or seven times this year. The first cut is currently forecast to occur in June, with four cuts totaling a full percentage point by the end of 2024.
Recent inflation data showed the rate of price growth continuing to slow, although the consumer price index jolted markets when it came in higher than expected in January. However, Powell noted in testimony before Congress this week that inflation is falling, although it has not yet reached the point where the Fed is ready to cut it.
“I think we’re in the right place,” Powell said of the current political stance.