Federal Reserve Chairman Jerome Powell said a new inflation report released Friday is “in line with where we want to go,” pushing inflation toward the central bank's 2% goal. He maintained that Japan is still on a “bumpy road.''
“It's not as low as most of the good numbers we had in the second half of last year, but it's certainly closer to what we'd like to see,” Powell said during a question-and-answer session in San Francisco. Federal Reserve Board Meeting.
Powell was referring to new data released early Friday that showed the Fed's preferred inflation measure, the Consumer Expenditure Index, had cooled slightly.
The so-called “core” personal consumption expenditure index, which excludes volatile food and energy prices, rose 2.8% in February from a year earlier. This was in line with economist expectations and down from 2.9% in January.
Core prices rose 0.3% from January to February, also in line with expectations and down from 0.5% the previous month.
Although the new numbers were not as cold as last year, Powell reiterated that the central bank needs to see more positive inflation indicators, such as in the second half of 2023.
He said the Fed did not overreact to last year's positive inflation numbers, and it does not intend to overreact to two consecutive months of rising inflation data this year.
“So the question is: Is it just a bump or is it more than a bump? Will inflation slow down for more than two months?”
The Fed chair maintained that the Fed's base case remains the expectation that inflation will decline.
“We expect inflation to fall to 2%, albeit at times along a bumpy path,” Powell said. “But if that doesn't happen, obviously our interest rate policy will be different.”
Powell said the Fed wants to avoid the risk of cutting rates too soon and causing inflation to rise again, but the central bank also doesn't want to wait too long and cause unnecessary damage to the economy. Stated.
Still, Powell said the job market and economy are currently strong, “which means there's no need to rush into making cuts.”
“That means we can wait and be more confident that inflation is actually coming down to 2% on a sustainable basis.”
Markets closed for Good Friday are pricing in a more than 60% chance that the Fed will begin cutting interest rates in June on Thursday.
Last Wednesday, the Federal Reserve decided to keep interest rates on hold and maintain the outlook for three rate cuts this year. Officials also raised their expectations for inflation and economic growth.
Chairman Powell's comments today reinforce what he said after the last Fed policy meeting that the overall inflation picture hasn't changed much, even though the inflation numbers are hotter.
Some other Fed officials have warned investors to be patient about the pace of rate cuts.
For example, Fed Director Chris Waller said Wednesday that he is in no hurry to cut rates and is looking to see better indicators for at least a few months to have enough confidence that easing monetary policy will keep inflation at a level. said it was necessary. The Fed's target is 2%.
“There is no need to rush to lower policy rates,'' Waller said in a speech in New York.
Meanwhile, Atlanta Fed President Rafael Bostic also said last week that he currently expects only one rate cut this year, and believes it will occur later this year than previously expected.
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