Powell reiterates that premature action is at risk when the Fed reduces interest rates after March.

In an interview last Thursday, Federal Reserve Chairman Powell said that the Fed might wait until March to lower interest rates. He reiterated that Federal Reserve officials would like to see more economic data to ensure that inflation is on a sustainable path to the 2% target. “Although we believe that this is not the case, it would be prudent to give it some time to see that the data continue to confirm that inflation is falling to 2% in a sustainable manner.” Powell echoes his statement after last Wednesday's interest rate resolution. The Fed announced last Wednesday that it would maintain interest rates unchanged, and deleted in its statement the words on the possibility of further interest increases, suggesting that there was no rush to cut interest rates.

Powell also noted that, despite good economic performance and falling inflation in the US, the outlook remains uncertain, and the path to reducing inflation to the 2% target set by the Fed is not clear. It is noteworthy that an interviewer, in an external note, said that Powell suggested that the first reduction might occur around the year.

In an interview, Powell also stated that he did not expect policymakers to “reverse substantially” their 2024 rate projections. The dotted map released last December shows that policymakers expect 75 basis points of interest to fall in 2024. Powell added: “All participants, with the exception of several participants, believe that it is appropriate for us to start adjusting our restrictive positions by reducing interest rates this year.” “So, of course, this is the basic case, and we will do so. Given the overall situation, we just want to choose the right time.” This interview provided Powell with an opportunity to interact with a wider audience. Although inflation in the United States has declined significantly in recent months, Powell has repeatedly stressed that the Fed needs to see more data before reducing interest rates.

At the same time, the United States labour market remained strong. According to data released last Friday, the number of new non-farm jobs in the United States in January was 353,000, well above market expectations of 180,000; unemployment remained at 3.7 per cent, below market expectations of 3.8 per cent; and average hourly pay grew at 4.5 per cent, the highest since March 2022, higher than market expectations of 4.1 per cent.

The Fed, for its part, accused the Fed of trying to boost the economy by cutting interest rates before the election. Powell said, as he had repeatedly stressed in the past, that Fed officials would not include political or electoral factors in policy decisions, “we never, never will.”