The US economy’s enduring strength and a “lack of progress” on inflation means the central bank likely won’t cut interest rates at its upcoming policy meeting just two weeks away, Federal Reserve Chair Jerome Powell said Tuesday.
“The recent data have clearly not given us greater confidence” that inflation is headed toward the central bank’s 2% goal, Powell said during a moderated discussion hosted by the Wilson Center. Instead, he said, there are indications “that it is likely to take longer than expected to achieve that confidence.”
“Right now, given the strength of the labor market and progress on inflation so far, it’s appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us,” the Fed chief said.
A detail view as a motorist fills up with fuel at a gas station, Friday, March 1, 2024, in Houston. Aaron M. Sprecher/AP
Interest rates are currently nestled at a 23-year high after the Fed launched an aggressive rate-hiking campaign two years ago. Inflation is down considerably from a four-decade peak reached in the summer of 2022, but recent inflation reports have shown persistent price pressures in services and housing.
Higher borrowing costs, coupled with elevated prices for essentials, have forced many Americans to cut back. And while the US economy and the job market remain on strong footing, higher mortgage rates have all but stalled the housing market.
But the latest retail sales report showed that consumers continued to spend last month, and marks the latest shred of evidence that the economy remains solid, leaving the Fed in no rush to cut rates.
The central bank typically reduces rates whenever the economy sharply weakens because it is also mandated by Congress to achieve maximum employment, in addition to stable prices. There is currently no sign of a sharply deteriorating job market.
This story is developing and will be updated.
