Federal Reserve Chairman Jerome Powell has underscored that there is no immediate need to reduce interest rates, asserting that the Federal Reserve will act only if warranted by circumstances. During a Congressional hearing, Powell reiterated that the Central Bank would consider cutting rates again if the labor market were to unexpectedly weaken. “The U.S. economy is fundamentally strong,” Powell stated, noting that while inflation is edging closer to the 2% target, it remains comparatively high.
Having already slashed the benchmark rate by a full percentage point in the final quarter of last year, Powell stressed in his written statements to the Senate Banking Committee that, “With the economy holding steady, we must avoid any hasty changes in our policy stance.”
The context of Powell’s comments is a period marked by inflation that still surpasses the Fed’s 2% target, compounded by shifts in long-established U.S. policies under the Trump administration, such as imposing tariffs on steel and aluminum and considerable cuts in public spending. President Donald Trump has frequently criticized the Fed, raising concerns regarding the institution’s historical independence from political influence.
While Powell refrained from directly addressing these political shifts in his statement, he assured that the Fed’s interest rate policy remains “well-suited to tackle the risks and uncertainties facing us.”
Additionally, the Fed Chairman announced that the central bank has commenced a second review of its policy strategies and communication tools. Powell reiterated that this review will not entertain the possibility of altering the 2% inflation target, a benchmark some economists consider too low. He has consistently argued against modifying this objective, asserting the importance of maintaining the existing goal.