Federal Reserve Chairman Jerome Powell confirmed that the central bank will cut rates, but stopped short of offering a possible timeline on when rates will come down.
In prepared remarks delivered today before the U.S. House Financial Services Committee, Powell noted the policy making Federal Open Market Committee has “has maintained the target range for the federal funds rate at 5¼ to 5½% since its meeting last July.” Looking ahead, Powell did not see rates rising, but he also would not commit himself to driving forward with a rate cutting strategy.
“We believe that our policy rate is likely at its peak for this tightening cycle,” he said. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2% percent inflation objective is not assured.”
Powell added, “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%. At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment. In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks.”
Ultimately, Powell insisted the central bank did not expect “it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.” He also acknowledged the burden the central bank is carrying with its go-slow policy on rate cuts.
“We understand that our actions affect communities, families, and businesses across the country,” he said. “Everything we do is in service to our public mission. We at the Federal Reserve will do everything we can to achieve our maximum employment and price stability goals.”
