Federal Reserve’s Jerome Powell sees ‘lack of further progress’ on inflation, pausing expected rate cuts
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Federal Reserve chair Jerome Powell has said there’s been an unexpected “lack of further progress” on tackling the record-high inflation rates that hit the US in recent years, putting the brakes on expected rate cuts from the central bank.
“The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence,” Mr Powell said on Tuesday at a policy forum in Washington.
“More recent data shows solid growth and continued strength in the labour market, but also a lack of further progress so far this year on returning to our two per cent inflation goal,” he added.
Last week, the Department of Labor released its latest consumer-price index figures, showing core inflation growing at a cumulative 3.8 per cent over the last 12 months.
The figures prompted the S&P 500 to fall and investors to sell off Treasury bonds.
Further data from the Department of Commerce, expected to be released next week, is likely to show prices up 2.8 per cent in March from a year earlier.
As recently as February, the Fed chief was openly discussing when benchmark interest rates might come down.
Given the strong economy, he told CBS News, “We feel like we can approach the question of when to begin to reduce interest rates carefully.”
The continued inflation has both political and economic ramifications.
The public remains broadly unsupportive of Joe Biden’s handling of the economy, according to a recent poll, though support is creeping up modestly from past months.
A Financial Times/University of Michigan poll published on Monday showed roughly four in ten registered voters nationally now support Mr Biden’s handling of the economy, a jump of five percentage points from March.
The poll also showed a growing majority of sampled voters are increasingly worried about gas prices as a serious problem affecting their finances.
Given the stubborn inflation level, the Federal Open Market Committee decided in March to hold interest rates between 5.25 and 5.5 per cent, the highest level in 23 years, an attempt to slow equally historic inflation of over 9 per cent that was recorded in July 2022.
Traders earlier this year predicted the Federal Reserve could cut interest rates six or seven times given strong economic progress, but the federal regulator has estimated it’ll conduct closer to three cuts at this point.
