Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing, and Urban Affairs Committee hearing entitled “Semiannual Monetary Policy Report to Congress” on Thursday, March 7, 2024, in the Dirksen Building. .
Tom Williams | Cq-roll Call Inc. | Getty Images
Fed Chairman Jerome Powell suggested Thursday that a rate cut could not be far off if the inflation signals align.
In remarks to the Senate Banking Committee, central bank leaders did not give an exact timeline for when the relief would arrive, but said that day could come soon.
“We’re waiting for more confidence that inflation is sustained at 2%,” he said. “Once we have that confidence and it’s not too far from there, then we should start lowering the level of limits.” That would be appropriate.” Powell said this in response to his question about interest rates and inflation. He said the latest rate cuts were intended to keep the Fed from “pushing the economy into recession rather than normalizing policy as the economy normalizes.”
Chairman Powell’s remarks come as financial markets are changing their expectations for the Fed’s policy.
Earlier this year, futures traders expected the Fed to begin cutting interest rates in March and continue through six or seven cuts this year. The current outlook is for the first cut to occur in June, with four cuts totaling 1 percentage point by the end of 2024.
Although January’s consumer price index spooked markets by beating expectations, recent inflation data show the pace of price rises continues to slow. Still, Powell noted in Congressional testimony this week that while the Fed is not ready to cut rates yet, inflation is trending down.
“I think we’re in the right position,” Powell said of the current policy stance.