Federal Reserve Chairman Jerome Powell announces that interest rates will remain unchanged during a press conference at the Federal Reserve Bank of America’s William McChesney Martinbuilding on June 12, 2024 in Washington, DC.
Kevin Dietsch | Getty Images
Federal Reserve Chairman Jerome Powell expressed satisfaction with inflation progress over the past year but said he wanted to see more before feeling confident enough to start cutting interest rates.
“We have made substantial progress in lowering inflation to our objective,” Powell said at a central bank forum in Sintra, Portugal.
“last [inflation] “This announcement, and previous ones, suggest that we are returning to a disinflationary trajectory. We want to be confident that inflation is declining sustainably towards 2 percent before beginning the process of tapering or easing policy,” he added.
Powell was speaking at a forum that also included European Central Bank President Christine Lagarde and Brazilian Central Bank Governor Roberto Campos Neto, hosted by the ECB and moderated by CNBC’s Sarah Eisen.
The comments come as markets are closely watching the moves of the Fed and other central banks as inflation shows signs of easing and some central banks, including the European Central Bank (ECB), have begun to gradually cut interest rates.
The Commerce Department’s personal consumption expenditures price index, which the Federal Reserve relies on as its main inflation gauge, rose 2.6% over the 12 months in May. That’s down steadily from about 4% a year ago, but policymakers don’t expect it to reach the Fed’s 2% target until 2026 or later.
Powell said he was seeing progress on inflation but was wary of taking premature steps that would threaten to slow inflation, which hit its fastest pace since the early 1980s two years ago.
“We are well aware that acting too soon could undo the good work that has been done,” he said. “Acting too late could unnecessarily undermine the economic recovery and expansion.”
Powell added that weakening inflation and a stronger economy and labor market have created a better balance of the risks of cutting rates too early and too late this year.By contrast, for much of last year the Fed worried about the greater risks of cutting rates too early and allowing inflation to start trending up again.
Earlier this year, markets were expecting at least six quarter-percentage-point rate cuts from the Fed. They have since adjusted and are now expecting two cuts in September and by the end of the year. But members of the Federal Open Market Committee, the interest-rate-setting body, were expecting just one rate cut when it met in June.
Asked whether he thought the Fed could cut interest rates in September, Powell said, “I’m not going to give you a specific date here today.”
He was also asked whether he was concerned about the political situation, including whether Donald Trump, a fierce critic of Powell, would win the presidential election in November.
“I’m not focused on that at all, it’s just not a topic of conversation. I really think we’re just continuing to do our job,” he said.
