Federal Reserve Chair Jerome Powell said policymakers will likely wait beyond March to cut interest rates as he sought to explain the central bank’s rationale for eventual reductions to a broad public audience.
In an interview conducted Thursday with CBS’s 60 Minutes that aired Sunday evening, Powell reiterated that Fed officials want to see more economic data to assure that inflation is on a sustainable path to their 2% goal, according to a transcript provided by CBS.
The “danger of moving too soon is that the job’s not quite done, and that the really good readings we’ve had for the last six months somehow turn out not to be a true indicator of where inflation’s heading,” Powell said in the interview with CBS’s Scott Pelley.
“We don’t think that’s the case,” he said. “But the prudent thing to do is to, is to just give it some time and see that the data continue to confirm that inflation is moving down to 2% in a sustainable way.”
Powell said it isn’t likely that the Federal Open Market Committee, the Fed panel that sets interest rates, “will reach that level of confidence” about inflation’s path by its March 19-20 gathering, echoing remarks he made at a press conference Wednesday.
Pelley said in a voiceover that Powell suggested the first cut could happen around midyear, though the transcript of the interview — which included comments that were not aired during the show — did not indicate that.
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Treasuries slid at the open in Asia as Powell’s comments underscored the likelihood that bond investors had overshot in pricing for rapid rate cuts. Treasuries fell across all maturities, with benchmark 10-year yields climbing four basis points to 4.06% as of 8:04 a.m. in Hong Kong.
The Fed chief also said he didn’t expect policymakers to “dramatically” change their 2024 interest-rate forecasts, which in December showed they expect their benchmark lending rate to reach 4.6% by the end of the year, according to their median estimate.
“All but a couple of our participants do believe it will be appropriate to, for us to begin to dial back the restrictive stance by cutting rates this year,” Powell said. “And so, it is certainly the base case that, that we will do that. We’re just trying to pick the right time, given the overall context.”
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Broader Audience
The interview offers Powell an opportunity to communicate to a broader audience just days after the Fed’s decision to hold interest rates unchanged at a range of 5.25% to 5.5%, a 22-year high. Policymakers on Wednesday cemented the end of their aggressive campaign to push up rates, but have signaled they’re in no rush to cut them.
While inflation has subsided substantially in recent months, Powell has repeatedly emphasized the central bank’s need to see more data before lowering borrowing costs. He indicated last week a rate cut is unlikely in the first quarter.
The Fed’s preferred inflation metric slowed to a rate of 2.6% by the end of last year, well below its peak of 7.1% in mid-2022. While that’s still above the Fed’s 2% goal, the labor market remains strong. Data out Friday showed unemployment held at a historically low 3.7% in January as employers added another 353,000 jobs.
The timing of this year’s policy pivot poses unique challenges for the Fed. Rapid price increases have angered Americans, weighed on President Joe Biden’s approval ratings and thrust Powell and the Fed into election-year politics. Cutting rates this year subjects the Fed to Republican accusations that the central bank is trying give Democrats a boost by aiding the economy ahead of the election.
Democratic lawmakers including Senators Sherrod Brown and Elizabeth Warrren sent letters last week urging Powell to lower interest rates. And former President Donald Trump told Fox Business Network on Friday that he wouldn’t reappoint Powell, even though he chose him to lead the central bank in 2017.
Powell emphasized as he has repeatedly in the past, that Fed officials do not factor politics or elections into their policy decisions. “We never do. And we never will,” he said.
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“Integrity is priceless, and at the end, that’s all you have,” he added. “We plan on keeping ours.”
Inflation Battle
The interview was Powell’s first 60 Minutes appearance since inflation began surging in the second half of 2021. Fed officials attributed rising prices largely to “transitory factors,” but costs for services had also started to rise, a sign that inflation was spreading beyond supply-chain kinks.
Powell was renominated to a second term by Biden in November 2021. The Fed waited to raise rates until March 2022, and then responded aggressively. Over the course of 16 months, the benchmark lending rate jumped from near zero to a range of 5.25% to 5.5%, prompting a surge in borrowing costs for cars, homes and credit cards. Three regional lenders collapsed in early 2023.
It was the fastest pace of rate increases since former Fed Chair Paul Volcker’s war on inflation in the early 1980s. But unlike the 1980s, inflation has fallen sharply with little cost to jobs or growth.
Powell “wants to control the narrative heading into the election,” Mark Spindel, the chief investment officer at Potomac River Capital, said before the interview aired. “It’s not quite a victory lap, but he wants to remind the country how successful the Fed has been.”
