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Fed Chairman Powell Cites Risk in Keeping Rates Too High for Too Long
In testimony before the U.S. Senate Banking Committee Tuesday, Federal Reserve Chair Jerome Powell suggested that the nation’s central bank may soon determine the time has come to begin lowering the federal funds rate. The Fed has maintained the key interest rate in a range of 5.25% to 5.5% since the July meeting of the Federal Open Market Committee.
Citing the Fed’s often-stated goal of 2% inflation, Powell said in prepared remarks, “Incoming data for the first quarter of this year did not support” confidence that inflation was moving toward that goal. He added, though, “The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%.” He also pointed to the current jobs market: “strong, but not overheated.”
Powell also acknowledged the risk in keeping rates higher for longer. “Elevated inflation is not the only risk we face,” he told the committee. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
Reuters reported that following Powell’s comments, investors continued to put a nearly 70% probability on a Fed rate cut in September. “He’s beginning to tee up a rate cut,” Brian Jacobsen, chief economist with Annex Wealth Management in Brookfield, WI, told Reuters. “They view risks in not cutting soon enough.”
- ◦Economy
- ◦Policy/Gov't
