Powell says a strong US economy is letting the Fed be ‘cautious’ about cutting interest rates

Federal Reserve Chair Jerome Powell said Wednesday that the US economy’s strength means the central bank can show some restraint with cutting interest rates.

Federal Reserve Chair Jerome Powell said Wednesday that the US economy’s strength means the central bank can show some restraint with cutting interest rates. “The US economy is in very good shape, and there’s no reason for that not to continue,” Powell said at an event hosted by The New York Times. “The good news is that we can afford to be a little more cautious” with cutting rates, the Fed leader said. Powell’s comments come as the Fed is expected to cut interest rates later this month for the third time this year. The central bank began to lower borrowing costs in September after inflation slowed and the job market started to cool off. Yet, despite the Fed’s moves, borrowing money hasn’t become much cheaper. That’s because interest rates for the vast majority of loans, including mortgages and credit cards, track the yield on the 10-year US Treasury note. That yield jumped last month to the highest level since the summer and is down only slightly this week. Despite the Fed’s work bringing down inflation over the past two years, expectations that President-elect Donald Trump’s proposed economic policies could stoke inflation have thrown bond yields into an upswing. Trump has pledged to impose massive tariffs on America’s three biggest trading partners, which economists widely expect to jack up prices for consumer electronics, produce and some forms of alcohol. If enacted, those duties are likely to translate into faster inflation, which would prompt a response from the Fed, either by halting rate cuts or possibly raising rates again.