Federal Reserve Chair Jerome Powell stated Thursday that the central bank is likely to implement gradual interest rate cuts in the coming months, noting that inflation remains persistent, and officials want to monitor its trajectory. Speaking in Dallas, Powell emphasized that while inflation is moving closer to the Fed’s 2% target, it has not yet reached that goal.
Despite inflationary pressures, Powell acknowledged the strength of the economy, allowing the Fed to take its time in making rate adjustments. “The economy is not sending any signals that we need to be in a hurry to lower rates,” he remarked, highlighting that the current economic stability provides room for a measured approach.
Economists predict a quarter-point rate cut in December following recent reductions in September and last week. However, future moves by the Fed remain uncertain. In September, Fed officials signaled expectations of four rate cuts in 2025, while Wall Street now anticipates just two cuts. After Powell’s cautious comments, the likelihood of a rate cut in December dropped to just below 59% from 83% the day prior, according to CME FedWatch.
Powell also discussed the Fed’s critical independence, emphasizing how public confidence in the central bank’s ability to manage inflation has been key to reducing inflationary pressures since the pandemic. He reiterated that inflation should continue to decline, albeit at a “bumpy” pace. Powell declined to comment on political matters, including Donald Trump’s proposals for tariffs and mass deportations, which have raised concerns about potential economic impacts and inflationary pressures.
With core inflation remaining in the high 2% range for five consecutive months, Powell’s cautious stance reflects broader uncertainty within the Fed about further rate cuts, given ongoing economic growth and inflation’s resilience. Other Fed officials, including Dallas Fed President Lorie Logan, have echoed concerns about potential risks in reducing rates too aggressively.
