Powell says no need for Fed to rush rate cuts given strong economy
By Ann Saphir and Howard Schneider
DALLAS (Reuters) -Ongoing economic growth, a solid job market, and inflation that remains above its 2% target mean the Federal Reserve does not need to rush to lower interest rates, Fed Chair Jerome Powell said on Thursday in remarks that may point to borrowing costs remaining higher for longer for households and businesses alike.Powell affirmed that he and his fellow policymakers still consider inflation to be "on a sustainable path to 2%" that will allow the U.S. central bank to move monetary policy "over time to a more neutral setting" that isn't meant to slow the economy.
But what that neutral rate might be in the current environment and how quickly the Fed might try to reach it all remain up in the air, particularly as central bankers assess both the ongoing strength of the economy and the impact the incoming Trump administration's policies, from higher tariffs to less immigrant labor, may have on economic growth and inflation.
Powell largely deflected questions about how new tariffs on imports or running the economy with fewer workers might alter the path of inflation the central bank has been trying to lower.
"We can do the arithmetic. If the are fewer workers there'll be less work done," Powell said, before adding "this is getting me into political issues that I really want to stay as far away from as I possibly can."
As of now, he said the economy was sending no distress signal that might prompt the Fed to accelerate rate cuts, and to the contrary "if the data let us go a little slower, that seems a smart thing to do."
"The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully," Powell said in prepared remarks delivered at a Dallas Fed event.
Fed officials and investors are taking stock of how continued U.S. economic strength and the uncertainty around the economic agenda of President-elect Donald Trump's administration, particularly regarding tax cuts, tariffs and an immigration crackdown, may affect economic growth and inflation.
After Powell's prepared remarks yields on shorter-term Treasury bonds rose, and traders pared bets about how far the Fed might cut rates in this cycle. The central bank cuts its benchmark overnight right to a 4.5% to 4.75% range at a meeting last week. As of September officials saw the rate dropping as far as 2.9% in 2026, but investors now see it remaining as high as 3.9%.