MNI: Powell Says Most Of FOMC See Cuts At Some Point In 2024

Federal Reserve Chair Jerome Powell said Wednesday the central bank is likely to begin cutting interest rates “at some point this year” but the risks are two-sided as inflation could remain stubborn and the economy could deteriorate.

“If the economy evolves broadly as we expect, most FOMC participants see it as likely to be appropriate to begin lowering the policy rate at some point this year. The outlook is still quite uncertain, and we face risks on both sides,” Powell said in the text of remarks at Stanford University.

“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2%. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.” (See MNI POLICY: Fed's Rate Cut Timeline Shaken By Inflation Bumps)

The Fed chief welcomed progress in bringing inflation down but added that “the job of sustainably restoring 2% inflation is not yet done.”

The lagged effects of monetary policy mean the drag from restrictive actions is still filtering through the economy, Powell said. “Tight monetary policy continues to weigh on demand, particularly in interest-sensitive spending,” he said.

SOMETIME BUMPY

Some economic data had been hotter than officials hoped but added that the overall story of slow but gradual return to the Fed’s 2% inflation target remains intact, he said.

“Recent readings on both job gains and inflation have come in higher than expected. The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2% on a sometimes bumpy path,” Powell said.

"Labor market rebalancing is evident in data on quits, job openings, surveys of employers and workers, and the continued gradual decline in wage growth. On inflation, it is too soon to say whether the recent readings represent more than just a bump."