Federal Reserve Chairman Jerome Powell said on Thursday (November 14) that the U.S. economy is performing “very well” and there is no rush to cut interest rates.
“The economy has not sent any signals that we need to cut rates quickly,” Powell said in a speech in Dallas on Thursday. “We are seeing a strong economy now, which allows us to make decisions cautiously.”
The Fed started significantly lowering interest rates in September, with a 50 basis points cut, and then reduced the policy rate by another 25 basis points in early November. Officials have indicated they are willing to cut rates further as long as inflation continues to slow.
Powell’s statement on Thursday is in line with his colleagues, advocating for a gradual approach to future rate cuts.
Data released earlier this week showed that the core inflation index in the U.S. remained strong in October. The core consumer price index (excluding food and energy costs) has maintained a 0.3% increase for the third consecutive month.
“Inflation rates are getting closer to the long-term target of 2%, but have not yet reached it,” Powell said. “We are committed to completing this task. With labor market conditions generally balanced and inflation expectations stable, I expect inflation to continue to decline, moving towards the 2% target, although there may be bumps along the way.”
Powell did not hint at whether there would be a rate cut at the December meeting. The futures market bets on a 70% chance of a 25 basis points rate cut.
Policy uncertainty may also be one of the reasons why the Fed’s attitude towards rate cuts is currently more restrained. If President Trump fulfills campaign promises such as tax cuts, immigration restrictions, and tariff deployments, next year’s monetary policy may change accordingly.
The U.S. economy has averaged around 3% growth over the past two years, and while the labor market has cooled, it remains resilient. Powell stated that the labor market is in a “solid state” and has returned to a “more normal” level consistent with full employment requirements based on many indicators.
“Labor has expanded quickly, with productivity growth in the past five years exceeding the pace of the two decades before the pandemic, increasing the economy’s production capacity, allowing for rapid growth without overheating,” he said.
“In the end, the direction of policy rates will depend on the upcoming data releases and how the economic outlook evolves,” Powell added.
(Some information in this article is based on reports from Bloomberg.)