Fed Chair Says Strength of Economy Allowing it to be Patient With Any Rate Cuts

WASHINGTON–Federal Reserve Chairman Jerome Powell said the strength of the economy is giving the central bank flexibility to be patient when it comes to cutting rates.

Jerome Powell

This year has been filled with predictions over when the Fed will move to reduce rates, including by credit union economists. But inflation has been more stubborn than many had forecast, and most now say it will be June at the earliest before the Fed makes any move.

Last week, a new report showed inflation in February was 2.5%, far below the 7% peak seen in 2022 and closer to the Fed’s 2% target.

In an interview last week with the National Public Radio’s Marketplace program, Powell said, “We can, and we will be, careful about this decision — because we can be. The economy is strong: We see very strong growth.”

‘Don’t Need to be in a Hurry’

As Powell noted, even with the higher rates consumers have continued to spend and employment has remained strong.

“That means that we don’t need to be in a hurry to cut,” Powell said. “It means we can wait and become more confident that, in fact, inflation is coming down to 2 percent on a sustainable basis.”

As CUToday.info reported earlier, the Fed indicated following its most recent meetings that it will look to reduce rates three times in 2024, a quarter-point a time. Powell said the Fed is paying particular attention to the labor market. 

‘Something We Would Look at Carefully’

“If we were to see unexpected weakness in the labor market,” Powell told Marketplace, “then that’s something we would be looking at carefully, and could draw a response as well.”

Powell said he sees no indicators of a financial downturn. “There’s no reason to think that the economy is in a recession or is at the edge of one,” Powell said, before adding, “But, humility.”