Latest Inflation Data Meets Expectations as Fed Chairman Emphasizes Patience in Interest Rate Cuts

Chủ tịch Fed nhấn mạnh chưa vội cắt giảm lãi suất

Chủ tịch Cục Dự trữ Liên bang Mỹ (Fed) Jerome H. Powell has stated that the strong economic growth is providing the central bank with flexibility and patience before considering interest rate cuts.

In a recent interview on “Marketplace” in San Francisco, the Fed Chairman emphasized, “We will be cautious with interest rate decisions because the economy is strong.”

The latest Personal Consumption Expenditures (PCE) report released on Friday showed that consumers continue to spend at a rapid pace. The PCE inflation, measured at 2.5% in February, is significantly lower than the peak of 7.1% in 2022 and only slightly higher than the Fed’s target of 2%. Recent employment data has also remained stable. Overall, the economy remains resilient even with higher interest rates.

Powell stated, “That means we don’t need to rush to cut rates. We can wait and have more confidence that inflation is sustainably coming down to 2%.”

The Federal Reserve is trying to balance two risks. On one hand, officials do not want to keep rates too high for an extended period, as it increases the risk of an unnecessary recession. On the other hand, they do not want to cut rates too soon before inflation is fully under control.

If sustained high inflation persists for several years, it can erode the economy as individuals and businesses adjust their behavior, making it more challenging to tame inflation in the long run.

While the current economy appears strong, Powell believes that if there are signs of cracks in the job market, the Fed may react accordingly.

“If we see any unexpected weakness in the labor market, we’ll carefully consider and may respond,” said Powell.

The Fed Chairman reiterated that while there is always a possibility of a recession, he does not see a high risk at the moment. “There’s no reason to think that the economy is currently in a recession or near recession,” Powell noted.

Last week, the central bank maintained the benchmark interest rate at a range of 5.25% to 5.50% and reaffirmed its expectation of cutting rates by 0.75% by the end of 2024.

The Fed is expected to keep rates steady as it has done since July last year at its policy meeting from April 30 to May 1.

Source: Business Today, The New York Times, Reuters