Federal Reserve Chair Jerome Powell said policymakers may wait until after March before cutting interest rates. He tried to explain to the public at large the rationale for the Fed's eventual rate cut.
In an interview with CBS's 60 Minutes on Thursday, Powell reiterated that the Fed wants to see more economic data to ensure inflation is on a sustainable path to its 2% target, according to a transcript provided by CBS. The show aired on Sunday night.
In an interview with CBS's Scott Pelley, Powell said: "The danger of acting too early is that the work isn't quite done, and the good data of the last six months is somehow not a true indicator of where inflation is headed."
We believe that this is not the case. "But the prudent thing to do is to give it some time and see if the data continues to confirm that inflation is coming down to 2% in a sustainable way." ”
Powell said that the Federal Open Market Committee (FOMC), which sets interest rates, is unlikely to "reach that level of confidence" in the direction of inflation at its March 19-20 meeting, echoing his speech at a press conference last Wednesday.
In a voiceover, Paley said Powell hinted that the first rate cut could happen around mid-year, although transcripts of interviews — including comments that didn't air on the show — don't suggest that.
U.S. Treasuries opened in Asian markets** as Powell's comments highlighted that bond investors may be expecting too much for a quick rate cut. U.S. Treasuries of all maturities**, with the yield on the benchmark 10-year Treasury climbing 4 basis points to 406%。
Powell also said he doesn't expect policymakers to "substantially" change their rates for 2024. According to their median estimates, last December's ** showed that they expected the benchmark lending rate to reach 4. by the end of the year6%。
All but a few participants agreed that it would be appropriate for us to adjust our restrictive stance by cutting interest rates this year. ""So, of course, that's the base case, we're going to do that," Powell said. Considering the overall situation, we just wanted to pick the right moment. ”
*Wider audience*
This interview provided Powell with an opportunity to speak to a wider audience, just a few days after the Fed decided to keep interest rates at 525% to 5The 22-year high of 5% was unchanged. Policymakers ended their aggressive campaign to raise interest rates last Wednesday, but signaled that they are in no hurry to cut rates.
Although inflation has fallen sharply in recent months, Powell has repeatedly stressed that the Fed needs to see more data before it can lower borrowing costs. He hinted last week that a rate cut in the first quarter was unlikely.
The Fed's preferred inflation gauge slowed to 26%, well below 71% peak. While this is still above the Fed's 2% target, the labor market remains strong. Data released on Friday showed that the U.S. unemployment rate remained at 3 in JanuaryA record low of 7% and 35 percent of employers added30,000 jobs.
The timing of this year's policy pivot presents a unique challenge for the Fed. The rapid price hike infuriated Americans, affected Biden's approval ratings, and pushed Powell and the Fed into politics for the year. A rate cut this year will put the Fed under reproach from Republicans who accuse the Fed of trying to boost the Democrats by helping the economy before the first day.
Democratic lawmakers, including Senators Sherrod Brown and Elizabeth Warren, sent a letter to Powell last week urging him to lower interest rates. Former Donald Trump told Fox Business Network on Friday that he would not reappoint Powell even though he chose him to lead the Fed in 2017.
Powell stressed that, as he has repeatedly emphasized in the past, the Fed** will not factor politics or elections into policy decisions. "We never have. We never will. ”
Integrity is priceless, and at the end of the day, that's all you have. He added, "We intend to preserve ours." ”
*Inflation War*
This is Powell's first appearance on "60 Minutes" since inflation began to soar in the second half of 2021. The Fed attributed prices primarily to "transitory factors", but the cost of services also started, suggesting that inflation has spread beyond the chain.
Powell was nominated by Biden for re-election in November 2021. The Fed waited until March 2022 to raise interest rates before responding aggressively. Over the course of 16 months, the benchmark lending rate jumped from near zero to 525% -5.5% range, causing the cost of borrowing for cars, homes and credit cards to skyrocket. Three regional banks collapsed in early 2023.
This is the fastest rate hike since former Federal Reserve Chairman Paul Volcker declared war on inflation in the early '80s. But unlike in the '80s, inflation has fallen sharply, and employment and economic growth have barely been affected.
Mark Spindel, chief investment officer at Potomac River Capital, said before the interview aired that Powell "wants to rein in the front" and that it wasn't exactly a celebration of victory, but he wanted to remind all of the U.S. how successful the Fed was. ”