Fed Chair Powell says there has been a ‘lack of further progress’ this year on inflation

Federal
Reserve
Chair

Jerome
Powell
said
Tuesday
that
the
U.S.
economy,
while
otherwise
strong,
has
not
seen
inflation
come
back
to
the
central
bank’s
goal,
pointing
to
the
further
unlikelihood
that
interest
rate
cuts
are
in
the
offing
anytime
soon.

Speaking
to

a
policy
forum
focused
on
U.S.-Canada
economic
relations,
Powell
said
that
while
inflation
continues
to
make
its
way
lower,
it
hasn’t
moved
quickly
enough,
and
the
current
state
of
policy
should
remain
intact.

“More
recent
data
shows
solid
growth
and
continued
strength
in
the
labor
market,
but
also
a
lack
of
further
progress
so
far
this
year
on
returning
to
our
2%
inflation
goal,”
the
Fed
chief
said
during
a
panel
talk.

Echoing
recent
statements
by
central
bank
officials,
Powell
indicated
the
current
level
of
policy
likely
will
stay
in
place
until
inflation
gets
closer
to
target.

Since
July
2023,
the
Fed
has

kept
its
benchmark
interest
rate
in
a
target
range
between
5.25%-5.5%,
the
highest
in
23
years.
That
was
the
result
of
11
consecutive
rate
hikes
that
began
in
March
2022.

“The
recent
data
have
clearly
not
given
us
greater
confidence,
and
instead
indicate
that
it’s
likely
to
take
longer
than
expected
to
achieve
that
confidence,”
he
said. “That
said,
we
think
policy
is
well
positioned
to
handle
the
risks
that
we
face.”

Powell
added
that
until
inflation
shows
more
progress, “We
can
maintain
the
current
level
of
restriction
for
as
long
as
needed.”

The
comments
follow
inflation
data
through
the
first
three
months
of
2024
that
has
been
higher
than
expected.
A

consumer
price
index
reading
for
March,
released
last
week,
showed
inflation
running
at
a
3.5%
annual
rate
—
well
off
the
peak
around
9%
in
mid-2022
but
drifting
higher
since
October
2023.

Treasury
yields
rose
as
Powell
spoke.
The
benchmark


2-year
note,
which
is
especially
sensitive
to
Fed
rate
moves,
briefly
topped
5%,
while
the
benchmark


10-year
yield
rose
3
basis
points.
The
S&P
500
wavered
after
Powell’s
remarks,
briefly
turning
negative
on
the
day
before
recovering.

Powell
noted
the
Fed’s
preferred
inflation
gauge,
the
personal
consumption
expenditures
price
index,
showed

core
inflation
at
2.8%
in
February
and
has
been
little
changed
over
the
past
few
months.

“We’ve
said
at
the
[Federal
Open
Market
Committee]
that
we’ll
need
greater
confidence
that
inflation
is
moving
sustainably
towards
2%
before
[it
will
be]
appropriate
to
ease
policy,”
he
said. “The
recent
data
have
clearly
not
given
us
greater
confidence
and
instead
indicate
that
it’s
likely
to
take
longer
than
expected
to
achieve
that
confidence.”

Financial
markets
have
had
to
reset
their
expectations
for
rate
cuts
this
year.
At
the
start
of
2024,
traders
in
the
fed
funds
futures
market
were
pricing
in
six
or
seven
cuts
this
year,
starting
in
March.
As
the
data
has
progressed,
the
expectations
have
shifted
to
one
or
two
reductions,
assuming
quarter
percentage
point
moves,
and
not
starting
until
September.

In
their
most
recent
update,
FOMC
officials
in
March
indicated
they
see
three
cuts
this
year.
However,
several
policymakers
in
recent
days
have
stressed
the
data-dependent
nature
of
policy
and
have
not
committed
to
set
level
of
reductions.

Correction:
Powell’s
comments
follow
inflation
data
through
the
first
three
months
of
2024
that
has
been
higher
than
expected.
An
earlier
version
misstated
the
year.