MNI: Powell Says Fed Needs More Disinflation Evidence To Cut

Federal Reserve officials are optimistic about a steady recent slowing in inflation but want to see it continue for a while longer before they take the “important step” of beginning interest rate cuts, Fed Chair Jerome Powell told 60 Minutes in an interview airing Sunday.

“The prudent thing to do is to, is to just give it some time and see that the data continue to confirm that inflation is moving down to 2% in a sustainable way,” he said in an interview recorded Thursday, repeating that he thinks a move at the March meeting is unlikely.

“We want to see more evidence that inflation is moving sustainably down to 2%. We have some confidence in that. Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.”

Powell largely reiterated the message of his press conference last week, saying the economy remains strong and the labor market is becoming less overheated.

He said inflation doesn’t need to fall all the way to the central bank’s 2% target before officials can cut rates, but more progress is still needed.

MORE GOOD DATA

“We want to see more good data. It's not that the data aren't good enough. It's that there's really six months of data. We just want to see more good data along those lines,” he said. “It's not likely that this committee will reach that level of confidence in time for the March meeting, which is in seven weeks.”

Still, most Fed members believe that it will be appropriate to start cutting rates this year, Powell added. The Fed Chair does not see a recession on the horizon.

“The economy's strong. The labor market's strong. Inflation's coming down. There's no reason why that can't continue,” he said. (See: MNI INTERVIEW: US Manufacturing Nearing Growth Phase, ISM Says)

Powell said the Fed is monitoring risks in the commercial real estate sector, saying it could hurt some regional banks but will not lead to widespread financial turmoil.

“We have work-from-home, and you have weakness in office real estate, and also retail, downtown retail. You have some of that. And there will be losses in that,” he said. “We looked at the larger banks' balance sheets, and it appears to be a manageable problem. There's some smaller and regional banks that have concentrated exposures in these areas that are challenged.”