Federal Reserve Chair Jerome Powell says the Fed doesn’t need to be ‘in a hurry’ to reduce interest rates

The Federal Reserve Chairman Jerome Powell announced on November 14 that strong U.S. economic growth will allow policymakers to decide how fast to lower interest rates. Powell argues that the economy is not sending any signals that the Fed needs to be in any hurry to lower rates.

According to the Fed chair, the current economic strength allows the Fed to approach its interest rate decisions carefully. Powell also revealed that he is confident because an assessment of the current economic growth was by far the best of any major economy in the world.

Powell admits solid economy gives the central bank room to reduce rates

BREAKING: Fed Chair Powell says the Fed does not need to be "in a hurry" to reduce interest rates.

He said, "the economy is not sending any signals that we need to be in a hurry to lower rates."

Why did the Fed cut by 50 basis points in September? pic.twitter.com/ujHNkj7FMa

— The Kobeissi Letter (@KobeissiLetter) November 14, 2024

The Federal Reserve chair highlighted that a solid economy with low unemployment, robust consumer spending, and strengthening business investment gives the central bank room to take its time in reducing interest rates.

“The economy is not sending any signals that we need to be in a hurry to lower rates.”

– Jerome H. Powell

Powell disclosed that the current economic strength allows it to make careful decisions. In fact, he admitted that the labor market is holding up well despite disappointing growth in October. 

However, Powell attributed the low growth in the labor market last month to storm damage in the Southeast and labor strikes. He also highlighted that the unemployment rate has been rising but has flattened out in recent months and remains low by historical standards.

Federal Reserve officials expect inflation to continue moving lower

The central bank chair also addressed the question of inflation, citing broad-based progress. According to Powell, the Fed officials expect inflation to continue to drift back towards the central bank’s 2% goal. The Fed chair believes that getting there could be on a sometimes-bumpy path. 

Even so, this week’s inflation data showed an uptick in both consumer and producer prices, with 12-month rates pulling further away from the Fed directive. The Fed chair highlighted that the two indexes are indicating inflation by the Fed’s preferred measure at 2.3% in October, or 2.8% excluding food and energy.

Powell’s remarks came a week after the Federal Open Market Committee lowered the central bank’s benchmark borrowing rate by a quarter percentage point. The FOMC cut the borrowing rates down into a range between 4.5%-4.75 following a half-point cut in September.

The central bank chair described FOMC’s move as a recalibration of monetary policy that no longer needs to be focused on stomping out inflation. Powell claimed that the Fed now has a balanced aim at sustaining the labor market as well. 

On the other hand, Powell remained discrete when it came to providing his own forecast for December and 2025. According to him, the Fed seeks to guide its key rate down to a neutral setting that neither boosts nor inhibits growth but is not sure what the endpoint will be. Even though markets largely expect the Fed to continue with another quarter-point cut in December and then a few more in 2025, Powell remained discrete.

Powell further highlighted that the Federal Reserve is confident that strength in the economy and the labor market can be maintained with an appropriate recalibration of its policy stance. The Fed chair also mentioned that with inflation moving sustainably down to 2%, the Fed will move policy over time to a more neutral setting, but the path for getting there is not yet preset.