MNI: Fed In No Hurry To Adjust Interest Rates, Powell Says
MNI (WASHINGTON) - The Federal Reserve is in no rush to adjust interest rates and will hold them higher for longer if the economy stays strong and disinflation stalls out, Fed Chair Jerome Powell said Tuesday.
"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," he said in prepared testimony to the Senate Banking Committee.
“If the economy remains strong and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly,” he said. (See MNI INTERVIEW: Fed Likely On Hold For Most Of 2025-Kroszner)
Inflation has eased significantly over the past two years but is still too high, the Fed chair said. PCE inflation, the Fed's preferred measure, was 2.6% in December and 2.8% excluding food and energy prices. The economy overall grew solidly in 2024 though investment dropped off in the last three months of the year, Powell said. He made no specific mention of tariffs or other policy changes from the Trump administration.
“The economy is strong overall and has made significant progress toward our goals over the past two years. Labor market conditions have cooled from their formerly overheated state and remain solid. Inflation has moved much closer to our 2% longer-run goal, though it remains somewhat elevated.”
The FOMC is attentive to both the price stability and full employment sides of its mandate, Powell said, adding that the labor market is not a major source of inflation pressure.
Powell said the Fed’s 100 basis points of rate cuts last year were a recalibration of policy which was “appropriate in light of the progress on inflation and the cooling in the labor market.”