Fed's Powell says officials won't wait until inflation reaches 2% to cut rates

foxbusiness.com:

JPMorgan Asset Management Chief Market Strategist Gabriela Santos analyzes the Federal Reserve's decision making on 'The Claman Countdown.'

Federal Reserve Chair Jerome Powell said Monday that policymakers will not wait until inflation falls to 2% in order to cut interest rates. 

«The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,» Powell said at the Economic Club of Washington D.C.

The Fed chief reiterated that policymakers are looking for additional evidence that high inflation is conquered before they pivot to reducing rates.

«We want to have greater confidence that inflation is moving sustainably down toward our 2% target,» he said. «What increases that is more good inflation data. And lately, we have been getting some of that.»

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The Marriner S. Eccles Federal Reserve Board Building is seen on September 19, 2022 in Washington, DC. ((Photo by Kevin Dietsch/Getty Images) / Getty Images)

Officials voted at their most recent meeting in May to hold interest rates steady at a range of 5.25% to 5.5%, the highest level since 2001. Although policymakers left the door open to rate cuts later this year in their post-meeting statement, they also stressed the need for «greater confidence» that inflation is coming down before easing policy.

Since then, there has been some evidence that inflation is starting to ease again. The May personal consumption expenditures index showed that inflation had cooled to 2.6%, from a high of 7.1%.