Powell Clarifies Fed's Stance: Rate Cuts Post-March, Inflation and Economic Outlook

📝 SUMMARY: In a significant interview with CBS's '60 Minutes', Federal Reserve Chair Jerome Powell elaborated on the central bank's current stance on interest rate cuts and the broader economic outlook. Powell emphasized that the Fed is cautious about reducing rates too soon, waiting for more concrete evidence that inflation is consistently moving towards their 2% target. He mentioned that a March interest rate cut is unlikely, as the Fed requires further data to gain confidence in the inflation trajectory.

Powell's interview served to clarify the Federal Open Market Committee's (FOMC) perspective, especially after their recent decision to maintain interest rates between 5.25% and 5.5%. This decision marked the end of the Fed's aggressive rate increase campaign, though they are not rushing into rate reductions either. Despite recent easing of inflation, now at 2.6% compared to a mid-2022 peak of 7.1%, the Fed remains vigilant, with the labor market showing strength - unemployment is at a low 3.7%, with 353,000 new jobs added in January.

The Fed Chair also touched on the 2024 interest-rate forecasts, suggesting they haven't changed 'dramatically' from the December estimate of a 4.6% benchmark lending rate by year-end. Powell acknowledged the possibility of rate cuts later in the year, focusing on choosing the right time in the broader economic context.

Addressing political influences, Powell asserted the Fed's independence, stating that decisions are not swayed by politics or elections. He also discussed various external factors affecting the U.S. economy, including geopolitical risks, the Chinese economy's impact, the sustainability of the U.S. fiscal trajectory, and challenges in the commercial real estate sector.

Overall, Powell's interview highlights the Fed's cautious approach in navigating the complex economic landscape, balancing the need to control inflation with the risks of acting prematurely on interest rate adjustments.

🔍 SOURCE: https://www.bloomberg.com/news/articles/2024-02-05/powell-tells-60-minutes-fed-likely-to-wait-beyond-march-to-cut?srnd=premium