Federal Reserve Chair Jerome Powell announces that interest rates will remain unchanged during a press conference at the Federal Reserve’s William McChesney Martin Building on June 12, 2024 in Washington, DC.
Kevin Dietsch | Getty Images
Federal Reserve Chairman Jerome Powell on Tuesday expressed satisfaction with progress on inflation over the past year but said he wanted to see more before he was confident enough to start cutting interest rates.
“We have made great progress and are on track to bring inflation back to our target,” Powell said at a central bank forum in Sintra, Portugal.
“The last [inflation] The current reading and those before it to a lesser extent suggest that we are heading back down the disinflationary path. “We want to be more confident that inflation is falling sustainably towards 2% before we start tapering or easing monetary policy,” he added.
Powell spoke at a forum also attended by European Central Bank President Christine Lagarde and Brazilian Central Bank Governor Roberto Campos Neto. The forum was moderated by the ECB and the discussion was moderated by CNBC’s Sara Eisen.
The comments come as markets are closely watching moves by the Fed and its global counterparts as inflation shows signs of easing and some central banks, including the ECB, have slowly started cutting interest rates.
The Commerce Department’s personal consumption expenditures price index, which the Fed focuses on as its main measure of inflation, rose 2.6% over 12 months in May. That level has fallen steadily from around 4% a year ago, although policymakers don’t expect the Fed’s 2% target to be reached until 2026.
While Powell said he sees progress on inflation, he is wary of acting too soon and jeopardizing the downward trend in price increases, which reached their highest level since the early 1980s two years ago.
“We realize that if we leave too soon we can undo the good work we have done,” he said. “If we do it too late, we could unnecessarily undermine the recovery and expansion.”
The risks of acting too late rather than too early have become more balanced this year as inflation has declined and the economy and labor market have remained strong, Powell added. By contrast, the Fed spent much of last year concerned that cutting interest rates too early and allowing inflation to resume was the greater risk.
At the beginning of the year, markets had expected at least six interest rate cuts from the Fed, each of a quarter of a percentage point. Since then, market prices have been adjusted to anticipate two reductions, one in September and another before the end of the year. However, members of the Federal Open Market Committee, which sets interest rates, mentioned only one of them at their June meeting.
Asked whether he thought the Fed could cut interest rates in September, Powell replied: “I’m not going to set any specific dates here today.”
He was also asked whether he was worried about the political climate and, in particular, whether Donald Trump, a fierce Powell critic, should win the November presidential election.
“I don’t focus on that at all, and it’s not just a topic of conversation. I really think we just keep doing our job,” he said.
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2024-07-02 15:59:34
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