Powell: "No Rate Cuts Until Inflation Slowdown Is Confirmed"

Scheduled to Attend House and Report on Monetary Policy
"Inflation Slowdown Spreading... Policy Tightening to Be Reversed Within the Year"

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), reiterated that more evidence is needed to show that inflation is continuously slowing down before considering a rate cut. However, he indicated that the existing judgment that a rate cut within the year is appropriate remains unchanged despite the strong employment and inflation data in January.

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In prepared remarks distributed ahead of the semiannual monetary policy report to the House Financial Services Committee on the 6th (local time), Chairman Powell stated, "A rate cut will not be guaranteed until we gain greater confidence that inflation is consistently moving toward the central bank's 2% target."

He explained, "If policy restrictions are eased too early or too much, progress on inflation could be reversed," adding, "Ultimately, more restrictive policies may be necessary to bring inflation back to 2%." At the same time, he warned of the risks of prolonged excessive tightening, saying, "Conversely, reducing policy restrictions too late or too little could excessively weaken economic activity and employment."

He stated that the current benchmark interest rate, at 5.25?5.5%, has reached its peak. Chairman Powell said, "We view the policy rate as having peaked in this tightening cycle," and added, "If the economy broadly progresses gradually as expected, it will be appropriate to reverse policy restraint at some point this year."

Regarding recent inflation trends, Chairman Powell assessed that the slowdown is notable and broadly spreading. The Wall Street Journal (WSJ) analyzed that this suggests the Fed's baseline outlook, which expects inflation to slow down within the year despite the unexpected rise in January inflation, remains unchanged.

The core Personal Consumption Expenditures (PCE) price index, which the Fed pays the most attention to, rose 2.8% year-over-year in January, showing a slower increase compared to December last year (2.9%). However, the January Consumer Price Index (CPI) and Producer Price Index (PPI) rose more than expected, raising market concerns. CPI and PPI increased by 3.1% and 0.9% year-over-year, respectively, exceeding forecasts (2.9% and 0.6%).

Chairman Powell added that if the labor market weakens or inflation falls to a very convincing level, there is a possibility of cutting rates earlier and at a faster pace.

This content was produced with the assistance of AI translation services.