Fed Chair Powell wants inflation to cool further| Trending Viral hub

Federal Reserve Chairman Jerome H. Powell reiterated Wednesday that the central bank can take its time before cutting interest rates as inflation fades and economic growth sustains.

The central bank chief also used a planned speech at Stanford to emphasize the Fed’s independence from politics, a relevant message at a time when the election season threatens to put Fed policy in an uncomfortable spotlight.

This is an important year for the Federal Reserve: after long months of rapid inflation, price increases are finally slowing. That means central bankers could soon cut interest rates from their highest levels in two decades. The Federal Reserve raised rates to 5.3 percent between March 2022 and mid-2023 to cool the economy and control inflation.

However, determining when and how much to cut interest rates is complicated. Inflation has slowed more slowly in recent months, and the Federal Reserve does not want to cut rates too soon and fail to fully control price increases. Investors initially expected the Federal Reserve to lower rates earlier this year, but now see the first move coming soon in June or July as officials wait for more evidence that inflation has actually moderated.

“On inflation, it is too early to say whether the recent readings represent anything more than a simple increase,” Powell said in comments prepared for his delivery. “We do not expect it to be appropriate to reduce our policy rate until we have greater confidence that inflation is falling sustainably towards 2 percent.”

“Given the strength of the economy and the progress on inflation so far, we have time to let incoming data guide our policy decisions,” he added. He called reducing inflation a “sometimes bumpy road.”

But taking more time means the Fed’s first rate cut (and any afterward) could happen just as well. The campaign is heating up. before the presidential elections in November.

Former President Donald J. Trump, the presumptive Republican nominee, already criticized the Federal Reserve for being political and said Powell was going to “do something to probably help the Democrats.” Trump was the first to elevate Powell to the position of chairman of the Federal Reserve, although President Biden has since reappointed him to that position.

The Federal Reserve is independent of the White House, and its officials often emphasize that they set their policies with economics, not politics, in mind. Powell did so on Wednesday, explaining that the Fed is insulated from partisan bickering and determined to ignore such pressures.

“Our decisions will always reflect our careful assessment of what is best for our economy in the medium and long term, and nothing more,” Powell said.

But the Fed chair also rejected calls for the Fed to do more on issues like climate changea request that often comes from Democrats.

“We must also avoid ‘mission creep,'” Powell said, citing climate change as something beyond the Fed’s purview. “Policies to address climate change are a matter for elected officials and those agencies entrusted with this responsibility.”

The Federal Reserve, he said, has “a limited role that relates to our responsibilities as a banking supervisor,” but it is likely to come under pressure to expand that role and “we are not, nor do we intend to be, responsible for climate policymaking. .”

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