Jerome Powell says Fed likely to wait beyond March to cut rates

“We don’t think that’s the case,” he said. “But the prudent thing to do is to, is to just give it some time and see that the data continue to confirm that inflation is moving down to 2% in a sustainable way.”

Powell said it isn’t likely that the Federal Open Market Committee, the Fed panel that sets interest rates, “will reach that level of confidence” about inflation’s path by its March 19-20 gathering, echoing remarks he made at a press conference Wednesday.

Treasuries slid at the open in Asia as Powell’s comments underscored the likelihood that bond investors had overshot in pricing for rapid rate cuts. Treasuries fell across all maturities, with benchmark 10-year yields climbing four basis points to 4.06% as of 8:04 AM in Hong Kong.

The Fed chief also said he didn’t expect policymakers to “dramatically” change their 2024 interest-rate forecasts, which in December showed they expect their benchmark lending rate to reach 4.6% by the end of the year, according to their median estimate.

“All but a couple of our participants do believe it will be appropriate to, for us to begin to dial back the restrictive stance by cutting rates this year,” Powell said. “And so, it is certainly the base case that, that we will do that. We’re just trying to pick the right time, given the overall context.”

While inflation has subsided substantially in recent months, Powell has repeatedly emphasized the central bank’s need to see more data before lowering borrowing costs. He indicated last week a rate cut is unlikely in the first quarter.

The Fed’s preferred inflation metric slowed to a rate of 2.6% by the end of last year, well below its peak of 7.1% in mid-2022. While that’s still above the Fed’s 2% goal, the labor market remains strong. Data out Friday showed unemployment held at a historically low 3.7% in January as employers added another 3,53,000 jobs.

The timing of this year’s policy pivot poses unique challenges for the Fed. Rapid price increases have angered Americans, weighed on President Joe Biden’s approval ratings and thrust Powell and the Fed into election-year politics. Cutting rates this year subjects the Fed to Republican accusations that the central bank is trying give Democrats a boost by aiding the economy ahead of the election.

Democratic lawmakers including Senators Sherrod Brown and Elizabeth Warrren sent letters last week urging Powell to lower interest rates. And former President Donald Trump told Fox Business Network on Friday that he wouldn’t reappoint Powell, even though he chose him to lead the central bank in 2017.

Powell emphasized as he has repeatedly in the past, that Fed officials do not factor politics or elections into their policy decisions. “We never do. And we never will,” he said.

“Integrity is priceless, and at the end, that’s all you have,” he added. “We plan on keeping ours.”