Federal Reserve Chair Jerome Powell Signals Patience in Adjusting Interest Rates
Washington, D.C. - Federal Reserve Chair Jerome Powell has indicated that the central bank is in no rush to adjust interest rates, reiterating that officials will adopt a measured approach before further reducing borrowing costs.
Key Points:
* Interest rates are significantly less restrictive than before, and the economy remains resilient.
* Reducing policy restraint too quickly or excessively could hinder progress on inflation.
* Reducing policy restraint too slowly or insufficiently could weaken economic activity and employment.
* The labor market remains robust, allowing for a patient approach to further rate reductions.
* President Donald Trump's economic policy proposals introduce uncertainty and will impact Fed's decision-making.
* The Fed is committed to completing the Basel III Endgame, strengthening bank capital standards.
* The Fed is not involved in decisions related to government payments and believes the system is secure.
Powell's comments largely align with his previous remarks in January, when Fed policymakers left interest rates unchanged. Investors maintained their expectations for rate cuts in 2025, with less than two cuts anticipated for the entire year.
The Fed's decision came after it lowered interest rates at each of its last three meetings in 2024. Powell and other officials have indicated they will likely maintain rates until they see further progress on lowering inflation and gain clarity on President Trump's economic plans.
Powell acknowledged that inflation remains "somewhat elevated" above the central bank's 2% goal, but stated that inflation expectations remain well-anchored.
The economy is experiencing a "soft landing," characterized by a gradual reduction in inflation without significant harm to the labor market. However, Powell noted that it was not his place to confirm or deny this characterization.
Lawmakers questioned Powell on financial regulation, given the Trump administration's push for deregulation. Powell expressed optimism for a bank-capital plan aligned with international standards and emphasized the Fed's commitment to completing the Basel III Endgame.
Powell also addressed concerns regarding the impact of a weakened Consumer Financial Protection Bureau (CFPB). He stated that no other federal regulator is solely responsible for examining giant banks for consumer protection.
The Fed's focus on government payments stems from Treasury Department scrutiny after Elon Musk's government efficiency team gained access to payment systems. Powell assured lawmakers that the Fed's systems are secure and that it does not make decisions related to government payments.
Powell is scheduled to testify before the House Financial Services Committee on Wednesday.