Federal Reserve Chair Jay Powell has once again cautioned investors not to expect a rate cut from the central bank in March and emphasised the prudence the Fed will exercise in reducing the key federal Funds Rate over time.
In a comprehensive interview with "60 Minutes" following last week's Federal Open Market Committee meeting, Powell expressed confidence in the economy. He promised not to be influenced by this year's presidential election and stated that the anticipated pain from rate hikes, particularly in comments made last August, never truly materialized.
"With the economy performing strongly, we believe we can approach the question of when to commence reducing interest rates with care," he told CBS 60 Minutes reporter Scott Pelley.
"We want to see more evidence that inflation is sustainably declining to 2%," Powell added. "Our confidence is increasing, but we require more assurance before taking the crucial step of initiating rate cuts."
He reiterated that it is unlikely the FOMC will take that initial step in March, which had been anticipated by futures markets (though the likelihood has now dropped to 20%, down from 37% before the Fed meeting and over 50% at the beginning of the year). This echoes the sentiments Powell expressed during a press conference after the first Fed meeting of the year last week.
In the post-meeting statement, the FOMC (Federal Open Market Committee) stated it would not reduce rates "until it has gained greater confidence that inflation is moving" toward the 2% target.
"We'll provide an update at the March meeting. However, nothing has transpired in the meantime that would lead me to believe that people will significantly alter their forecasts," he noted, suggesting that rate cuts may be on the horizon but not yet imminent.
Regarding comments made midway through last year, Powell had cautioned multiple times that there could be challenges for many individuals and businesses before inflation was under control. However, with the U.S. job market still robust, inflation declining, wages rising, business investment increasing, and solid economic growth, that scenario has not unfolded.
"It simply hasn't occurred. The economy has continued to grow strongly, and job creation has been substantial," he stated. "So, the kind of hardship I was concerned about, along with many others, has not materialized. That's certainly a positive development, and we aim to sustain it."
Powell also reiterated that neither he nor his colleagues would be influenced by political pressures during this presidential election year. Donald Trump had mentioned that if he wins the November election, he would not reappoint Powell as chair. Powell's term as chair extends until 2026, while his term on the Fed board concludes in 2028.
"We do not factor politics into our decisions. We never have, and we never will," Powell affirmed.
Powell expressed overall optimism about the economy, highlighting that inflation, while still above the Fed's target, has moderated, and the job market remains robust. He identified geopolitical events as the most significant risk on the horizon.
