Despite speculation to the contrary, Jerome Powell, Chairman of the Federal Reserve, has told a Senate committee that he and his colleagues “do not need to be in a hurry” to reduce interest rates.
Testifying before the Senate Committee on Banking, Housing, and Urban Affairs, Powell remarked that the “economy is strong, the labor market is solid, and we have the luxury of being able to wait and let our restrictive policy work to get inflation coming down again. And that’s what we’re doing.”
“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” Powell continued. “At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
In the last year, the Federal Reserve reduced interest rates three separate times by a full percentage point. Those actions came after the Fed had held interest rates to a high not seen in two decades.
Powell said those 2024 cuts were in response to a cooling of inflation and improved labor market.
“As the economy evolves, we will adjust our policy stance in a manner that best promotes our maximum-employment and price-stability goals,” continued Powell, remarking: “If the economy remains strong and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer.”
Powell additionally remarked that the Fed will not be influenced by recent public statements made by President Trump calling for a lowering of interest rates.
But he made sure to note that any number of new policies coming out of the White House could have an impact on how the Fed does its job. “It’s not just the tariffs. There are significant changes to immigration policy, fiscal policy, and also regulatory policy.”
“All four of those were things the President was elected to do,” said Powell. “We will then try to make an intelligent judgement about the overall effect on the economy of those and conduct our policy accordingly.”
February 13, 2025
By Garry Boulard
Photo courtesy of Federal Reserve Board
