Jerome Powell, chairman of the Federal Reserve, rejects growing expectations of interest rate cuts in the first half of 2024, saying that the FOMC will move cautiously, but will retain the possibility of further increasing the cost of money.
“It would be premature to conclude with certainty that we have reached a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell says, according to previews of a speech he will give tonight in Atlanta.
The president indicates that Fed officials plan to keep interest rates stable at their December 12-13 meeting, giving themselves more time to assess the economy. The latest macro data has fueled expectations among investors that the central bank could start cutting rates as early as March. The markets now assume a 25 bp cut by May for certain.
“The FOMC is strongly committed to reducing inflation to 2% over time and to maintaining restrictive policy until we are confident that inflation is on a path towards that goal,” Powell remarked, underlining that policy is now “well entered restrictive territory”.
The chairman highlights recent progress, noting that in the six months through October, core inflation, which excludes food and energy, was 2.5% year-on-year, compared to the overall target of 2% annual growth . “Monetary policy is thought to affect economic conditions with a lag, and the full effects of our tightening have probably not yet been felt.”
Finally, he describes the job market as “very strong,” although with the recent slowdown, “the economy is returning to a better balance between the supply and demand of workers.”