Federal Reserve Chair Jerome Powell recently emphasized the central bank's cautious stance on cutting interest rates, highlighting the need for further evidence that inflation is under control. Speaking at an event at the San Francisco Fed, Powell pointed out that the strong pace of US economic growth and robust labor market conditions provide confidence that inflation will decline gradually.
Powell noted that while recent inflation data aligns with expectations, the Fed remains committed to ensuring that inflation moves toward the target rate of 2% for a healthy economy before considering rate cuts. Market expectations suggest that the first rate cut could occur in June, reflecting the Fed's gradual approach to monetary policy adjustments.
Economists, such as Veronica Clark from Citigroup Inc., believe that the Fed's stance remains consistent, with recent inflation data meeting expectations. Despite some volatility in inflation measures, the Fed is expected to maintain its cautious approach and monitor additional data before making any policy changes.
Recent government data showed that the core personal consumption expenditures price index, a key inflation measure for the Fed, rose modestly in February after a larger increase in January. While the measure remains above the Fed's 2% target, Powell and other Fed officials are closely monitoring inflation trends to inform their policy decisions.
Overall, Powell's remarks underscore the Fed's commitment to data-driven decision-making and its cautious approach to managing inflation and interest rates in the current economic environment.