Federal Reserve Chairman Jerome Powell said there is no need for the central bank to “rush” to lower interest rates because of the strong economy and that the Fed will “closely monitor” certain inflation indicators to ensure they remain within acceptable ranges. He said he would continue to do so. .
“The economy is not sending a signal that there is an urgent need to cut rates,” Powell said in prepared remarks at an event in Dallas.
“The economic strength we are seeing now allows us to make prudent decisions.”
The Fed cut interest rates by a quarter of a point last week, the second time in the past seven weeks.
Ultimately, Powell reiterated that the path of the Fed’s interest rates will depend on future data and how the economic outlook develops.
He said inflation is getting closer to the Fed’s 2% target, but not there yet. He said the Fed would pay close attention to the core measure of inflation in goods and services, excluding housing, which has declined over the past two years.
“We expect these rates to continue to move within their recent ranges,” he said, “and we are monitoring them closely to ensure that changes occur.”
He added that the path to the Fed’s 2% goal “will be bumpy at times.”
October inflation figures released this week showed little progress toward goal, raising questions about how far the Fed will cut interest rates in 2025.
The “core” consumer price index (CPI), which excludes more volatile food and gas prices, released on Wednesday showed prices rose 3.3% in October for the third consecutive month.
And on Thursday, the “core” producer price index (PPI) revealed that prices rose 3.1% in October, up from 2.8% the previous month and faster than economists expected a 3% rise.
Chairman Powell estimated that the Fed’s preferred measure of inflation, the core personal consumption expenditures (PCE) index, would rise 2.8% in October, based on CPI and other data released this week. This is a further increase from 2.7% in September and August.
But economists don’t think the data will change the Fed’s outlook for a 25 basis point rate cut in December. And the market agrees, with the CME FedWatch tool now predicting a nearly 80% chance the Fed will cut interest rates by 25 basis points at its December meeting.
However, the lack of recent progress on the inflation front could prompt the Fed to revise its Summary Economic Projections (SEP), which had expected four rate cuts of 1 percentage point through 2025. .
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