“No Rush to Cut Rates”: Fed Chair Powell — Evening Brief – 02.11.25

In his testimony to the Senate Committee on Banking, Housing, and Urban Affairs, Fed Chair Jerome Powell indicated that the Federal Reserve is in no hurry to make adjustments to its policy rate. He emphasized that the Fed’s current stance is already significantly less restrictive compared to just a few months ago, suggesting the central bank is taking a more cautious approach as it assesses the impact of its 100 basis points of interest rate cuts since last September.

“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” he said. “At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”

Since the last Federal Open Market Committee meeting, a variety of key economic data points have been released, including updates on personal consumption expenditures, nonfarm payrolls, inflation expectations, and tariff developments. Despite this data, the market remains cautious and waiting for further signs before adjusting its expectations about future monetary policy. Notably, the market appears to be more hawkish than the Fed’s Summary of Economic Projections, particularly regarding the future path of interest rates.

In his semiannual monetary policy report to Congress, Powell highlighted that if the economy remains strong and inflation does not progress toward the Fed’s 2% target, the central bank could maintain its policy restraint for a longer period. This reflects the Fed’s ongoing focus on ensuring inflation is brought under control without prematurely loosening policy.

At the same time, Powell emphasized the Fed’s need to stay attentive to risks on both sides of its dual mandate — maintaining price stability and ensuring a strong labor market. He noted that if the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, the Fed would be prepared to ease policy accordingly.

“We will do everything we can to achieve the two goals Congress set for monetary policy — maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2% goal, and keeping longer-term inflation expectations well anchored.”

Powell provided an update on the current state of the U.S. economy, stating that it continues to expand at a “solid pace”, indicating resilience in economic growth. He also highlighted that labor conditions remain “solid” and appear to have stabilized, suggesting a strong and steady labor market, which has been a key area of focus for the Fed.

On the inflation front, Powell noted that inflation has eased significantly over the past two years, a positive development as the central bank has been working to bring inflation down from its peak levels. However, he acknowledged that inflation remains “somewhat elevated”, implying that while progress has been made, it has not yet fully reached the Fed’s target of 2%.