Jay Powell reiterated that the US central bank is in “no hurry” to cut interest rates, despite pressure from Donald Trump to lower borrowing costs in the world’s largest economy.
The Federal Reserve chair said in testimony to the Senate Committee on Banking, Housing and Urban Affairs on 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.”
The statement comes after the Fed late last month opted to hold the benchmark federal funds target range at 4.25-4.5 per cent, following three successive cuts which took the range down by 1 percentage point.
Most investors do not expect US rates to fall until around the middle of this year, in May or June.
Fed officials want more information on whether inflation is on track to hit policymakers’ 2 per cent target, with some members of the rate-setting Federal Open Market Committee concerned about the possible impact of Trump’s policies — such as tariffs and tax cuts — on price pressures.
The Trump administration has imposed a 10 per cent levy on Chinese imports, and 25 per cent tariffs on all imports of aluminium and steel are set to take effect on March 12. The White House has also threatened to impose 25 per cent tariffs on most Mexican and Canadian goods from early March.
Powell noted in his prepared remarks that at 2.6 per cent, headline personal consumption expenditures inflation remains above the central bank’s goal. The PCE measure is expected to remain above 2 per cent for the duration of 2025.
The jobs market, meanwhile, remained strong, though it was not “a source of significant inflationary pressures”, Powell said.
