Fed doesn’t need to be in hurry to cut rates as economic strength persists: Powell

Investing.com — Federal Reserve Chairman Jerome Powell said Thursday that economy isn’t signalling a need for speed on rate cuts as the recent strength allows the Fed to take a careful approach to monetary policy decisions. 

“The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully,” Powell said in a speech Thursday. 

The remarks echo that of other members following a slew of recent ‘Fed speak’ this week.  

“Given current economic conditions and the balance of risks, I believe the FOMC can judiciously and patiently evaluate incoming information in considering further lowering of the policy rate,” Musalem said in prepared remarks on Wednesday to the Economic Club of Memphis.

Powell said the central bank remains “confident” that the strength in the economy and labor market can be maintained even as the battle against inflation remains ongoing. 

“We are confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2 percent,” he added.

Inflation is likely continue its path lower, the Fed chief added, noting that estimates based on the consumer price index and other data released this week indicate that total PCE prices rose 2.3% over the 12 months ending in October and that, excluding the volatile food and energy categories, core PCE prices rose 2.8%. 

The Fed chief reiterated that the central bank is aware of the risks of moving too fast or too slow on rate cuts. 

“We know that reducing policy restraint too quickly could hinder progress on inflation. At the same time, reducing policy restraint too slowly could unduly weaken economic activity and employment,” Powell added.

The recent strength in the economy has been driven two supply-side factors. An increased in productivity and the labor supply, with the latter boosted by a surge in immigration. 

“What we saw over 2023 and 2024 was a surge in immigration and also a surge in the labor force, and it certainly pushed up economic growth,” Powell said.