Win McNamee
While the Federal Reserve’s restrictive monetary policy is putting pressure on economic activity and inflation, cutting interest too soon could cause damage, Fed Chair Jerome Powell will say on Wednesday in his testimony at the House Financial Services Committee hearing.
“Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%,” he will say, according to prepared text for his opening statement.
But there’s also risk in waiting too long to cut rates. “At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
The remarks echo statements Fed officials and Powell have made since the central bank’s last monetary policy meeting.
While he repeated that it will likely be appropriate to “begin dialing back policy retraint at some point this year,” Powell repeated that the Federal Open Market 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%.”
In January, total personal consumption expenditures (“PCE”) prices rose 2.4% Y/Y; excluding food and energy, core PCE prices increased 2.8%, both still above the Fed’s 2% goal but significantly down from its peak in 2022.
Also, he repeated that that the FOMC believes that the policy rate is likely at its peak for this tightening cycle, indicating it’s not considering a hike at this point.
As usual, Powell says the committee’s decisions will depend on the economic data. “In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks,” he said.
The hearing starts at 10:00 AM ET. Check back for updates.
