Fed’s Powell reiterates need for more data before rate cut

US Federal Reserve Chair Jerome Powell has assured the members of Congress that upcoming decisions on when and how fast to cut interest rates will be based solely on economic data. Powell stated that rate cuts “really will depend on the path of the economy.

Powell stressed that Fed’s focus is on maximum employment and price stability, and the incoming data as they affect the outlook, and those are the things we’ll be looking at,” and the Fed would like to see more data that confirm and make us more confident that inflation is moving sustainably down to 2%” before reducing the policy rate.

Powell in prepared remarks to the House panel said rate reductions will “likely be appropriate” later this year, “if the economy evolves broadly as expected.” However, he also cautioned that continued progress on lowering inflation “is not assured,” a fact that is keeping Fed officials from committing to any timetable or pace of rate reductions. Price pressures broadly seen as easing but also some concern that the process of disinflation may stall.

Recent data has done little to clarify the direction of the economy and inflation, with some analysts projecting price pressures to steadily ease, others anticipating inflation will persist, and investors expecting rate cuts to start in June.

Powell has made a point as chair to cultivate ties with Democratic and Republican lawmakers, aided by his reputation as a centrist with Republican roots who was named a Fed governor by former President Barack Obama, a Democrat, elevated to chair by Trump and then given a second four-year term as chair by Biden.

While the deep US cultural divide over issues like abortion and immigration may dominate the campaign, the Fed’s decisions could determine whether the presidential vote occurs in an environment of low inflation, low unemployment, and falling interest rates that typically favors an incumbent or in more challenging conditions.

Members of a closely divided but Republican-controlled House all face voters in November. While only some members of the Democratic-led Senate panel are up for reelection, those include Chair Sherrod Brown of Ohio, who has already urged Powell to get rate cuts underway given the decline in inflation.