Strong economic growth, a positive job market and controlled inflation could allow the US Federal Reserve to take their time in deciding how far and how fast to lower interest rates, according to Fed Chair Jerome Powell.
During remarks made on Thursday to business leaders in Dallas, Powell pointed towards further interest rate cuts, but suggested they might not come as soon as analysts predict.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
Power further affirmed that the Fed still consider inflation to be “on a sustainable path to 2%” that will allow the US central bank to move monetary policy “over time to a more neutral setting”.
US stocks broadly fell following Powell’s remarks, while shorter-term Treasury bonds rose.
In early November, the US Fed reduced interest rates by 25 basis points (bsp). The policymakers lowered the central bank’s key lending rate to a range of 4.5% to 4.75%.
The Fed’s decision is the second interest rate cut in four years. During this period, the agency raised the rates 11 consecutive times, the last of which was in July 2023, setting the range between 5.25% and 5.50%. This rate was held constant for eight consecutive meetings until it was reduced by 50 bps in September 2024 to a range of 4.75% to 5%.
