Federal Reserve Chairman Powell announced that interest rates will remain unchanged at a press conference held at the William McChesney Martin Building of the Federal Reserve Bank of Washington, DC on June 12, 2024.
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Federal Reserve Chairman Jerome Powell on Tuesday expressed satisfaction with the progress in inflation over the past year but said he would like to see more progress before he is confident enough to begin cutting interest rates.
“We have made considerable progress in getting inflation down to our target,” Powell told a central bank forum in Sintra, Portugal.
“The last (inflation) reading, and to a lesser extent the previous reading, suggest that we are returning to a deflationary path. Before we begin that process, we would like to be more confident that inflation continues to fall to 2%. Reduce the type or policy of easing,” he added.
Powell spoke at a forum that also included European Central Bank President Christine Lagarde and Brazilian Central Bank President Roberto Campos Neto. The forum is hosted by the European Central Bank.
The comments come as markets are closely watching the actions of the Federal Reserve and its global peers as inflation shows signs of easing and some central banks, including the European Central Bank, have slowly begun to cut interest rates.
While Powell said he saw progress on inflation, he was concerned about moving too quickly so as not to threaten the downward path of price increases, which have reached their highest pace since the early 1980s two years ago.
“We are well aware that if we act too early, we may undo all the progress we have made,” he said. “If we act too late, we may unnecessarily undermine the recovery and expansion.”
Powell added that the risks of acting too late versus too early this year have been better balanced as inflation recedes and the economy and labor market remain strong. By comparison, the Fed spent much of the past year worrying about the greater risks of cutting interest rates too early and allowing inflation to resume its upward trajectory.
Earlier this year, markets had expected the Fed to cut interest rates at least six times, by a quarter of a percentage point each time. Market pricing has since adjusted in anticipation of two price cuts, one in September and another before the end of the year. However, members of the rate-setting Federal Open Market Committee made only one recommendation at its June meeting.
Asked whether he thought the Fed might cut interest rates in September, Powell responded: “I’m not cutting rates today on any specific date.”
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