Fed’s Powell: Rate cuts are still underway

Federal Reserve Chair Jerome Powell said Thursday that interest rates are still expected to decline further, but suggested they might not be that much lower over the next few months.

Federal Reserve Chair Jerome Powell said Thursday that interest rates are still expected to decline further, but suggested they might not be that much lower over the next few months. Powell said more rate cuts are likely underway because the economy’s current trends and dynamics are expected to remain in place, at least in the short run. That includes a slowing job market and cooling inflation, facilitated by rates that are still at restrictively high levels. Holding borrowing costs at their current elevated rate could push up unemployment. “We are moving policy over time to a more neutral setting,” Powell said in prepared remarks for an event in Dallas. “The economy is not sending any signals that we need to be in a hurry to lower rates.” As the Fed looks toward continuing its rate-cutting cycle, the proposed policies of President-elect Donald Trump could eventually bring some dramatic changes to the US economy, which would then inevitably affect the Fed’s thinking on rates. Economists mostly agree that it will take time for Trump’s proposed policies to have an impact on the broader economy, if they take effect, so the economy next year might not change dramatically right away. Trump’s economic agenda includes extending 2017 tax cuts, rolling out a series of tax breaks, capping credit card interest rates at around 10%, and enacting high across-the-board tariffs — plans that will likely be shepherded along by the incoming Republican-led Congress. Inflation data for October didn’t show progress from the prior month, but it didn’t reflect a genuine pick up in price pressures either. It’s also too soon for Fed officials to conclude that October data is indicative of any new trend.