Federal Reserve Chair Jerome Powell, in an interview with “60 Minutes,” revealed that the central bank plans to proceed cautiously with interest rate cuts this year, moving at a slower pace than what the market expects. Despite the strength of the economy, Powell emphasized the need for more evidence that inflation is moving toward the 2% target before implementing rate reductions. He expressed rising confidence but highlighted the importance of further assurance before taking the significant step of cutting interest rates.

Powell made it clear that the Federal Open Market Committee (FOMC) is unlikely to make the first rate cut in March, as previously anticipated by futures markets. The committee’s post-meeting statement emphasized that rate cuts would not happen until there is greater confidence in inflation reaching the desired level. While markets have been speculating on the number of cuts, Powell supported the FOMC’s forecast of three reductions, as indicated in the December “dot plot” grid.

The Federal Reserve Chair expressed overall optimism regarding the economy, noting that inflation has moderated and the job market remains robust. Nonfarm payrolls saw significant growth in January, highlighting the strength of the labor market. Powell identified geopolitical events as the most significant risk to the economy.

The Unexpected Outcome of Rate Hikes

Addressing concerns about the pain that higher interest rates might have caused, Powell stated that the expected negative effects have not materialized. Contrary to his earlier prediction during the rate-hike cycle, the economy has continued to grow strongly, and job creation has been high. Powell expressed relief at the absence of the anticipated pain and emphasized the importance of sustaining this positive trend.

Political Independence

Powell reiterated that political pressure does not influence the Federal Reserve’s decision-making process. Neither he nor his colleagues take politics into account when making decisions, and they remain committed to maintaining this stance. In light of the upcoming presidential election, Powell assured that political considerations have no role in determining the central bank’s policies.

Conclusion