Powell testifying before a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill in Washington on Thursday. – ReuterspicFederal Reserve chair Jerome Powell said on Thursday the US central bank was “not far” from gaining the confidence it needs in falling inflation to begin cutting interest rates.
The Fed chair has been reluctant to declare the inflation battle finished, and cautioned in testimony to the Senate panel, as he did Wednesday before the House Financial Services Committee, that further progress back to the Fed's 2% target was not assured Yields on two-year Treasury notes fell slightly after Powell’s remarks, and investors firmed bets that an initial Fed rate cut would occur in June.
But Powell’s update on monetary policy kept intact the sense that the central bank is nearing the point where the current policy rate of interest, held at a more than 20-year high since July in a range between 5.25% and 5.5%, will be lowered in the months ahead. Also speaking on Thursday, Cleveland Fed president Loretta Mester told a conference in London that the Fed should be careful not to cut interest rates too soon as it looks to bring inflation down to its long-term 2% target.
“Doing so would undermine all of the good work that has gone into getting inflation to this point,” she added.