Fed still not ready to roll out a rate cut, Powell tells lawmakers

Inflation has come a long way since reaching a four-decade peak two years ago, Federal Reserve Chair Jerome Powell said Tuesday. However, central bank officials still want to see more progress before cutting interest rates, he noted.

Inflation has come a long way since reaching a four-decade peak two years ago, Federal Reserve Chair Jerome Powell said Tuesday. However, central bank officials still want to see more progress before cutting interest rates, he noted. “The (Fed) has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%,” Powell said in prepared testimony submitted to congressional lawmakers. “The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%,” he added. Powell is appearing Tuesday before the Senate Banking Committee to deliver his semiannual monetary policy report to Congress. He heads to the House Financial Services Committee on Wednesday to address the same report on the state of the US economy. The Fed’s key interest rate, which influences borrowing costs across the economy, has been at a 23-year high for about a year now, after the central bank aggressively lifted rates to bring down inflation. While the pace of price hikes slowed dramatically in 2023, it hit a snag early this year, which pushed back the timing of the first anticipated rate cut. Fed officials expect to cut interest rates just once this year, according to their latest economic projections in June, compared to the three cuts they forecast in March. Inflation resumed a downward trend in the spring, but officials appear to be in lockstep saying they need more evidence that inflation is truly headed toward their 2% goal. In June, consumer prices didn’t rise on a monthly basis for the first time since November, according to the Fed’s favorite inflation gauge, the Personal Consumption Expenditures price index. The annual PCE inflation rate registered at 2.6% in June, down slightly from 2.7% in May.