US Fed Approaches Confidence Threshold for Interest Rate Cuts, Says Powell

52

Jerome Powell, Chair of the US Federal Reserve, indicated that the central bank is nearing the threshold of confidence required to consider cutting interest rates due to falling inflation.
Speaking before the Senate Banking Committee, Powell emphasized the importance of waiting to ensure that inflation consistently declines to the target of 2%. He stated that the Fed is not far from attaining this confidence and that adjusting the level of restriction would be appropriate to prevent economic recession.
Powell acknowledged recent inflation surges and robust economic data but remained cautious about declaring victory in the battle against inflation. He warned that further progress towards the 2% target is not guaranteed, despite improvements seen since last year.
While headline inflation stands at 2.4% and underlying inflation slightly higher at 2.8%, both indicators have declined significantly since mid-last year, according to Powell.
Powell’s remarks have heightened expectations that the central bank may lower interest rates in the coming months from the current levels, which have remained at over 20-year highs since July.
However, discussions during Powell’s testimony were not solely focused on monetary policy. Regulatory proposals from the Federal Reserve Bank, housing policy, and the potential issuance of a central bank digital currency also featured prominently.
The Federal Open Market Committee (FOMC) is scheduled to convene next on March 19-20. During this meeting, policymakers will release a new policy statement and updated economic projections, offering insights into their expectations for the year ahead.