United States Federal Reserve Chairman Jerome Powell said on Monday that the central bank will not wait until inflation reaches 2% before cutting interest rates.
Speaking at the Economic Club of Washington, D.C. Powell Citing the idea that central bank policy has “long and variable lags” explains why the Fed won’t wait for its goals to be achieved.
“What this means is that if you wait until inflation gets all the way down to 2%, you may have waited too long because the tightening measures you are taking, or the degree of tightening, will still affect inflation,” Powell said. This could lead to inflation falling below 2%.
Powell said the Fed was seeking “greater confidence” to get inflation back to 2%.
“What adds to confidence in this is better inflation data, and we’ve had some of that recently,” he said.
Powell also said he believed a “hard landing” for the U.S. economy was not a “possible scenario.”
Monday was Powell’s first public speech since the June consumer price index report showed cooling inflationprices are actually falling month by month.
Powell said at the meeting The beginning of his appearance He did not intend to send any signal on when the Fed might start cutting interest rates. The central bank’s next policy meeting will be held at the end of July.
Powell made the remarks during a discussion with David Rubenstein, chairman of the Economic Club of Washington, D.C. and co-founder of Carlyle Group, where Powell previously worked.
The current target range for the federal funds rate is 5.25% to 5.50%. This is up from 0% to 0.25% during the Covid-19 pandemic and 1.50% to 1.75% before the health crisis.
The federal funds rate directly or indirectly affects the cost of funds throughout the economy, such as mortgage rates.
“People I don’t know always say, ‘Hey, cut rates.’ Someone said that in the elevator this morning.
