Fed Chair Jerome Powell spoke at a Senate hearing this morning about the next interest rate cut, saying that the US doesn’t “need to be in a hurry.” The chair of the Federal Reserve says that the central bank is cautiously attacking inflation and trying to limit consistent interest rate cuts, after over a year of raising the rates.
“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said in his prepared testimony Tuesday before the Senate Banking Committee. He will also testify before the House Financial Services Committee on Wednesday.
The central bank held rates steady in the range of 4.25%-4.5% at its last policy meeting on Jan. 29 after cutting interest rates for three consecutive meetings at the end of 2024. Jerome Powell and other Fed policymakers have stressed that they plan to move slowly this year as they assess the path of inflation and the effect of Trump’s economic policies.
How Many Interest Rate Cuts Will the Fed Execute This Year?
Earlier this year, the Fed noted that 3-4 rate cuts in 2025 are possible, but they will approach this with caution. For the past several years, the US economy has fought against inflation. The metric has been easing and retreated from a 40-year high to edge closer to central bank targets. Yet, with the figure still at the forefront of decision-making, the most recent data will inform the government’s action in a crucial year.
Powell made it clear in his new testimony Tuesday that the Fed can hold its benchmark rates steady for longer if the economy remains strong and inflation does not continue to move sustainably toward 2 percent — the Fed’s stated target. However, if the job market were to weaken unexpectedly or inflation fell more quickly, the Fed chair said the central bank could cut rates “accordingly.”
“We will do everything we can to achieve the two goals Congress set for monetary policy —maximum employment and stable prices,” Powell added Tuesday.
US President Donald Trump backs the Fed’s pause in cutting interest rates, calling it the “right thing to do.” Since being elected, Trump hasn’t been too aggressive in approaching the Central Bank, giving it the space to do its job.