WASHINGTON (AP) — Chairman Jerome Powell said in an interview broadcast Sunday night that the Federal Reserve remains on track to cut interest rates three times this year, a move expected to begin as early as May.
Powell, in an interview taped Thursday for the CBS news program “60 Minutes,” also said the nation’s job market and economy are strong, with no signs of a recession on the horizon.
“I think the economy is in good shape,” he said, “and there’s every reason to think it can get better.”
Powell’s comments largely echoed the remarks he made at a press conference on Wednesday, after the Federal Reserve decided to keep its key interest rate steady at around 5.4%, a 22-year high. To combat inflation, the Federal Reserve raised its benchmark interest rate 11 times in early March 2022, making borrowing costs for consumers and businesses significantly higher.
The Fed chairman also reiterated that the central bank’s next meeting in March would likely be too soon to cut rates. Most economists think the first cut is likely to come in May or June.
With inflation steadily cooling, nearly all 19 members of the Fed’s policy-making committee agreed that a cut in the central bank’s key interest rate would be appropriate this year, Powell said in the “60 Minutes” interview. Lowering that rate would help lower the cost of mortgages, car loans, credit cards and other consumer and business loans.
Fed officials indicated in December that they forecast three rate cuts in 2024, bringing their benchmark rate down to around 4.6% by the end of the year. Powell told “60 Minutes” that forecast likely still reflects policymakers’ views.
According to the Fed’s preferred measure, inflation fell to just 2.6% in December compared to 12 months earlier. And in the second half of 2023, inflation was measured at an annual rate of just 2%, in line with the Fed’s target level, down sharply from a peak of 7.1% in the summer of 2022.
Powell attributed the spike in inflation in 2021-2022 to the disruptions of the pandemic, including a shift in spending from services such as restaurant meals to goods such as home office furniture and exercise bikes. At the same time, COVID has closed or slowed down factories around the world, severely disrupting supply chains and causing widespread shortages of goods and components. Both trends, Powell said, accelerated inflation.
At the same time, Powell acknowledged in the interview that the Fed had misjudged the duration of the resulting inflation, which was repeatedly assumed to be short-lived. As before, Powell said the central bank had moved too slowly to raise its key interest rate, which could help slow borrowing and spending. Inflation started to pick up in mid-2021, but the Fed didn’t start raising rates until March 2022.
“So in retrospect, it would have been better if we had tightened policy sooner,” Powell said, referring to the rate hike. “I’m happy to say it. … We thought the economy was so buoyant that it would recover pretty quickly. And we thought that inflation would go away pretty quickly without our intervention.”
At his news conference on Wednesday, Powell signaled that the Fed was likely to cut rates this year, but stressed that central bank officials wanted to see further evidence that inflation was under control.
“It’s not that we’re looking for better data — we’re just looking for a continuation of the good data we’re getting,” he said. “We just need to see more.”
Also Wednesday, Powell repeatedly acknowledged the strength of the U.S. economy and noted that inflation has slowed without the sharp rise in unemployment and weak growth that many economists say will be needed to cool consumer demand and slow rising prices.
“We’ve had six months of good inflation data and an expectation that there’s more to come,” Powell said on Wednesday. “So it’s a good situation. Let’s be honest. It’s good economics.”
Other Fed officials expressed caution about the outlook for rate cuts, especially after a government report on Friday showed that job growth jumped unexpectedly in Decembera sign that businesses remain confident enough in the economy to add many workers.
Michelle Bowman, a member of the Fed’s Board of Governors, said on Friday that once it is clear that inflation is under control, it will eventually be appropriate to cut rates.
“In my opinion,” she said, “we haven’t gotten to that point yet.”
