Fed’s Powell emphasizes need for more evidence that inflation is easing before cutting rates

Federal
Reserve
Chairman

Jerome
Powell
said
Wednesday
it
will
take
a
while
for
policymakers
to
evaluate
the
current
state
of
inflation,
keeping
the
timing
of
potential
interest
rate
cuts
uncertain.

Speaking
specifically
about
stronger-than-expected
price
pressures
to
start
the
year,
the
central
bank
leader
said
he
and
his
fellow
officials
are
in
no
rush
to
ease
monetary
policy.

“On
inflation,
it
is
too
soon
to
say
whether
the
recent
readings
represent
more
than
just
a
bump,”
Powell
said
in
remarks
ahead
of
a
question-and-answer
session
at
Stanford
University.

“We
do
not
expect
that
it
will
be
appropriate
to
lower
our
policy
rate
until
we
have
greater
confidence
that
inflation
is
moving
sustainably
down
toward
2
percent,”
he
added. “Given
the
strength
of
the
economy
and
progress
on
inflation
so
far,
we
have
time
to
let
the
incoming
data
guide
our
decisions
on
policy.”

The
remarks
come
two
weeks
after
the
rate-setting
Federal
Open
Market
Committee
again
voted
to
hold
benchmark
short-term
borrowing
rates
steady.
In
addition,
the
committee’s
post-meeting
statement
on
March
20
included
the “greater
confidence”
qualifier
needed
before
cutting.

Markets
widely
expect
the
FOMC
to
start
easing
policy
this
year,
though
they
have
had
to
recalibrate
their
outlook
for
the
timing
and
extent
of
cuts
as
inflation
has
held
stubbornly
higher.
Other
economic
variables,
particularly
in
the
labor
market
and
consumer
spending,
have
held
up
as
well,
giving
the
Fed
time
to
assess
the
current
state
of
affairs
before
moving.

The
Fed’s
preferred
inflation
measure,
the
personal
consumption
expenditures
price
index,

showed
a
12-month
rate
of
2.5%
for
February,
or
2.8%
for
the
pivotal
core
measure
that
excludes
food
and
energy.
Virtually
all
other
inflation
gauges
show
rates
in
excess
of
3%.

“Recent
readings
on
both
job
gains
and
inflation
have
come
in
higher
than
expected,”
Powell
said. “The
recent
data
do
not,
however,
materially
change
the
overall
picture,
which
continues
to
be
one
of
solid
growth,
a
strong
but
rebalancing
labor
market,
and
inflation
moving
down
toward
2
percent
on
a
sometimes
bumpy
path.”

Other
Fed
officials
speaking
this
week
have
made
remarks
consistent
with
the
Fed’s
patient
approach.

Atlanta
Fed
President
Raphael
Bostic

told
CNBC
on
Wednesday
that
he
thinks
just
one
cut
might
be
in
the
offing
as
prices
of
some
important
items
have
turned
higher.
San
Francisco
Fed
President
Mary
Daly
said
three
cuts
is
a “reasonable
baseline”
but
noted
there
are
no
guarantees,
while
Cleveland’s
Loretta
Mester
also
said
cuts
are
likely
later
this
year
while
adding
that
rates
over
the
longer
term
may
be
higher
than
anticipated.
All
three
are
FOMC
voters.

Powell
reiterated
that
decisions
are
being
made “meeting
by
meeting”
and
noted
only
that
cuts
are “likely
to
be
appropriate
…
at
some
point
this
year.”

The
uncertainty
about
rates
has
caused
some
consternation
in
markets,
with
stocks
falling
sharply
earlier
this
week
as
Treasury
yields
moved
higher.
The
market
stabilized
Wednesday,
but
traders
in
the
fed
funds
futures
market
again
repriced
their
rate
expectations,
casting
some
doubt
on
a
June
cut
as
the
market-implied
probability
moved
to
about
54%
at
one
point,
according
to
CME
Group
data.

Along
with
his
comments
on
rates,
Powell
spent
some
time
discussing
Fed
independence.

With
the
presidential
election
campaign
heating
up,
Powell
noted
the
importance
of
steering
clear
of
political
issues.

“Our
analysis
is
free
from
any
personal
or
political
bias,
in
service
to
the
public,”
he
said. “We
will
not
always
get
it
right
—
no
one
does.
But
our
decisions
will
always
reflect
our
painstaking
assessment
of
what
is
best
for
our
economy
in
the
medium
and
longer
term
—
and
nothing
else.”

He
also
talked
about “mission
creep,”
specifically
as
it
relates
to
some
demand
for
the
Fed
to
get
involved
in
climate
change
issues
and
the
preparations
financial
institutions
take
for
related
events.

“We
are
not,
nor
do
we
seek
to
be,
climate
policymakers,”
he
said.

Correction:
Powell’s
remarks
come
two
weeks
after
the
Federal
Open
Market
Committee
again
voted
to
hold
rates
steady.
An
earlier
version
misstated
the
timing.
Raphael
Bostic
is
president
of
the
Atlanta
Fed.
An
earlier
version
misstated
the
city.