US Fed Chair indicates no rush in cutting interest rates
Reducing policy restraint too soon or too much could result in a reversal of progress was made in terms of inflation and ultimately require even tighter policy to get inflation back to 2 per cent target, US Federal Reserve Jerome Powell said, as he indicated the central bank is no rush to cut interest rates.
ANI
Mar 06, 2024 22:38 IST
Washington DC [US], March 6 (ANI): The Federal Reserve is in no rush to cut interest rates which means more pain for Americans, who have already faced almost two years of elevated borrowing costs on everything from car loans to mortgages.
Reducing policy restraint too soon or too much could result in a reversal of progress made in terms of inflation and it may ultimately require even tighter monetary policy decisions to get inflation back to 2 per cent target, US Federal Reserve Jerome Powell said, as he indicated the central bank is in no rush to cut interest rates.
The US Federal Reserve in its January meeting voted to leave the key interest rate unchanged at 5.25-5.50 per cent, keeping the policy rate unchanged for the fourth straight time on a trot.
Inflation in the US came in at 3.1 per cent in January, more than estimated by various quarters. Inflation has eased over the past year but remains elevated.
The US central bank had raised interest rates from near zero to now 5.25-5.50 per cent in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
"We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2 percent inflation objective is not assured," Chair Powell said before the Committee on Financial Services, US House of Representatives, as part of the Semiannual Monetary Policy Report to the Congress.
"The Federal Reserve remains squarely focused on our dual mandate to promote maximum employment and stable prices for the American people," Powell said.
He asserted that the economy has made considerable progress toward these objectives over the past year.
"While inflation remains above the Federal Open Market Committee's (FOMC) objective of 2 percent, it has eased substantially, and the slowing in inflation has occurred without a significant increase in unemployment. As labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals have been moving into better balance," he added.
Further, he noted that the Committee does not expect that it will be appropriate to reduce the interest rates until it has gained greater confidence that inflation is moving sustainably toward 2 per cent.
The US monetary policy committee is strongly committed to returning inflation to its 2 per cent objective.
Powell asserted restoring price stability is essential to achieve a sustained period of strong labor market conditions that benefit all. (ANI)
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