Fed's Powell says officials won't wait until inflation reaches 2% to cut rates

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Federal Reserve Chair Jerome Powell said Monday that policymakers will not wait until inflation falls to 2% before they pivot to cutting interest rates.

Federal Reserve Chair Jerome Powell said Monday that policymakers will not wait until inflation falls to 2% in order to cut interest rates. "The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%," Powell said at the Economic Club of Washington D.C.

Although policymakers left the door open to rate cuts later this year in their post-meeting statement, they also stressed the need for "greater confidence" that inflation is coming down before easing policy. Since then, there has been some evidence that inflation is starting to ease again. The May personal consumption expenditures index showed that inflation had cooled to 2.6%, from a high of 7.1%.

 

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