Fed Chair Admits No End In Sight For Inflation

Federal Reserve Chairman Jerome Powell said last week that while the economy was strong and inflation was easing, interest rate cuts were unlikely to happen in the next few months, CBS News reported.

In an interview with “60 Minutes” on February 3, Powell said while confidence in the economy was rising, the Fed wanted to wait for “some more confidence” before taking the step of cutting interest rates.

The rate of inflation has been slowing steadily for the past 11 months, leaving some economists hopeful that the Fed would announce a cut to interest rates at its first policy meeting of 2024.

However, on January 31, Powell announced that the interest rate would remain unchanged at least for now.

The Federal Reserve raised interest rates eleven times in the past two years to try to cool inflation.

With the economy continuing to grow and the labor market strong, the Fed Chairman told “60 Minutes” that the central bank should carefully approach the question of reducing interest rates, especially as long as inflation remains above 2 percent.

Powell explained that cutting interest rates too soon would risk another spike in inflation while cutting rates too late could spur a possible recession. He explained that the Fed must “balance those two risks” leaving no “easy, simple, obvious path” forward.

When asked if the Fed would wait until inflation dropped to 2 percent before cutting interest rates, Powell said that wouldn’t be the case. He explained that the central bank was “committed to returning inflation to 2 percent over time” but the Fed would not wait until inflation was at 2 percent before cutting rates.

The next vote on federal interest rates is scheduled for March.

However, Powell told “60 Minutes” that it was unlikely the Federal Open Market Committee would vote to cut interest rates next month but most of those involved in the committee meetings believe there should be a cut in the rate sometime this year.