Federal Reserve Chair Jerome Powell stated on Monday that the central bank would not wait for inflation to reach 2% before cutting interest rates. Speaking at the Economic Club of Washington D.C., Powell explained that central bank policy operates with “long and variable lags,” indicating that waiting until inflation hits the target could result in overshooting it. He emphasized the need for “greater confidence” that inflation is on a steady path back to 2%, supported by recent favorable inflation data.
Powell also expressed optimism about the U.S. economy, downplaying the likelihood of a “hard landing.” This was his first public appearance since the latest consumer price index report showed cooling inflation, with prices decreasing month-over-month. Despite discussing the economic outlook, Powell clarified that he did not intend to signal when the Fed might begin cutting interest rates, with the next policy meeting scheduled for the end of July.
In his discussion with David Rubenstein, Powell noted the current federal funds rate range of 5.25% to 5.50%, significantly higher than during the Covid-19 pandemic and pre-pandemic levels. The federal funds rate influences various economic aspects, including mortgage rates, directly impacting the cost of money throughout the economy.
