Fed can’t cut until it’s sure of inflation win, Powell says

investmentnews.com:

Federal Reserve Chair Jerome Powell reiterated to lawmakers that the US central bank is in no rush to cut interest rates until policymakers are convinced they have won their battle over inflation. 

In testimony before a House panel Wednesday, the Fed chief said it will likely be appropriate to begin lower borrowing costs “at some point this year,” but made clear officials are not ready yet. 

The remarks echoed a consistent message from nearly every Fed official in recent weeks: The economy and labor market are strong, meaning policymakers have time to wait for more evidence that inflation is headed back to their goal before cutting rates. 

“The committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” Powell told the House Financial Services Committee, adding later that officials would approach the decision “carefully and thoughtfully.”

The Fed chief was on Capitol Hill for the first of two days of his semiannual monetary policy testimony. He’s scheduled to testify before the Senate Banking Committee on Thursday. 

Republican lawmakers used the face-time with Powell to slam the Fed’s plan to boost capital requirements for big banks, and urged him to scrap the current proposal – a move Powell said he wouldn’t rule out. And Democrats warned that high rates are putting homeownership out of reach for many Americans, and implored him to lower borrowing costs.

“We need the Fed to start cutting because, like the rent, interest rates are too damn high,” Rep. Ayanna Pressley of Massachusetts said.

Treasury yields moved lower during the day in the wake of Powell’s comments and stocks climbed, while the dollar was lower.

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