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Powell backs potential rate cuts in 2024, but says inflation fight “not assured”

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Powell backs potential rate cuts in 2024, but says inflation fight “not assured” By Investing.com

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AuthorScott KanowskyEconomy

Published Mar 06, 2024 09:18AM ET

© Reuters.

Investing.com — The Federal Reserve’s ongoing push to cool inflation is “not assured,” according to Chair Jerome Powell, bolstering the case for the U.S. central bank not to unveil imminent interest rate cuts.

In prepared remarks prior to two days of testimony before lawmakers on Capitol Hill, Powell added that while the Fed’s restrictive policy stance is placing downward pressure on price gains, rate-setters still need “greater confidence” that inflation is sustainably moving toward its stated 2% target.

Until that time, Powell flagged, the rate-setting Federal Open Market Committee “does not expect that it will be appropriate” to slash borrowing costs down from more than two-decade highs.

His comments also spoke to the central dilemma facing policymakers as they consider the path ahead for interest rates this year, particularly as the Fed hopes to engineer a “soft landing” — a scenario in which inflation eases without sparking a broader downturn in the economy or labor market.

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

Still, Powell noted that the Fed’s recent tightening cycle is “likely” at its peak, adding that, should the economy evolve as expected, “it will likely be appropriate to begin dialing back policy restraint at some point this year.”

Powell backs potential rate cuts in 2024, but says inflation fight “not assured”

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