The Los Angeles Post
California & Local U.S. World Business Lifestyle
Today: February 06, 2025
Today: February 06, 2025

Powell says Fed will cut rates when ready, regardless of political calendar

FILE PHOTO: U.S. Federal Reserve Chair Powell testifies in Washington
July 10, 2024
Howard Schneider - Reuters

By Howard Schneider

WASHINGTON (Reuters) -Federal Reserve Chair Jerome Powell said on Wednesday the U.S. central bank will make interest rate decisions "when and as" they are needed, pushing back on a suggestion that a September rate cut could be seen as a political act ahead of the fall presidential election.

"Our undertaking is to make decisions when and as they need to be made, based on the data, the incoming data, the evolving outlook and the balance of risks, and not in consideration of other factors, and that would include political factors," Powell said in a hearing before the House Financial Services Committee. "We have a long history of doing that, including during election years...Anything we do will be very well grounded. It's just not appropriate for us to get into the business of thinking about election cycles at all, one way or the other."

Powell was responding to a question during a committee hearing from U.S. Representative Mike Lawler, Republican of New York, about whether a September rate cut, currently given a roughly 70% probability by investors, could be seen as trying to tilt the playing field ahead of the Nov. 5 elections.

The state of the economy, and particularly the surge in housing, food and other costs in recent years, has been a potent issue for Republicans given public sentiment that remains sour given the high price of many items even as inflation itself has slowed. Rate cuts initially expected early this year were pushed back after inflation proved stickier than expected, with the Fed's monetary policy debate now lined up squarely with the fall campaign.

"Since you made mention of the independence of the Fed, and I know you pride yourself on that independence, do you acknowledge or do members of the (Federal Open Market Committee) acknowledge that a rate cut in September could be viewed as political just 30 to 60 days before an election?" Lawler asked.

It was the second day in a row that Powell's semiannual round of congressional hearings, ostensibly to discuss the economy and monetary policy, was infused with detailed discussions of Fed independence - a concept Powell often preaches, something members of both parties in both chambers of Congress say they support, yet which still became a central talking point as the Fed nears a rate cut decision.

Republicans focused on the conditions that would warrant lower rates and encouraged Powell to not move until inflation was beaten; Democrats tried to draw him out on issues like proposals by a Republican-aligned group, called Project 2025, to overhaul and potentially weaken the Fed, and cited their concerns about rising unemployment.

KEEPING TO THE PATH

Powell, over his two days of commentary before the Senate and House committees that oversee the central bank, indicated the Fed was edging closer to a rate cut decision, while also insisting that he was not yet ready to declare that inflation had been beaten.

Powell and other Fed officials have said they will not cut interest rates until they have gained even greater confidence that inflation is headed back to the central bank's 2% target after a breakout surge during the pandemic.

"I do have some confidence of that," Powell said when asked directly if he felt the bar to cutting interest rates had been cleared, but "I am not ready to say that yet."Recent data, however, has been encouraging, Powell told lawmakers, and he emphasized that risks to the job market now stand on about equal footing with the risks of high inflation - with the Fed intent on meeting both its price stability and full employment goals.

"There is a path to getting back to full price stability while keeping the unemployment rate low," Powell said. "We're on it. We're very focused on staying on that path."

From ongoing growth to a 4.1% unemployment rate and falling inflation, Powell said the U.S. was enjoying "good numbers."

After hitting a 40-year high in 2022 the Fed's preferred measure of inflation, the Personal Consumption Expenditures Price Index, was 2.6% as of May. Powell reiterated the central bank will need to cut rates before the figure returns fully to 2%, but after the underlying momentum seems likely to take it there.

The Fed next meets on July 30-31. While officials are expected to maintain the benchmark interest rate at the comparatively high 5.25% to 5.5% range approved in July of 2023, further progress on inflation could lead to key changes in their policy statement that pave the way for a September cut.

The next inflation report will be issued on Thursday. Powell has more public remarks set for Monday at the Economic Club of Washington.

As they did in a Tuesday hearing before the Senate Banking Committee, lawmakers quizzed Powell on a variety of issues beyond monetary policy. Republicans in particular focused on bank regulatory proposals that have drawn opposition from the industry and GOP officials.

His other comments on Wednesday largely tracked the Tuesday hearing in the Senate, which analysts feel showed both increased faith in a continued decline in inflation and a growing sensitivity to the risks of keeping monetary policy too tight for too long and slowing the economy more than necessary.

As he did on Tuesday, Powell told House members that "more good data" would build the case for the U.S. central bank to cut interest rates.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

Related Articles

Amazon reports strong earnings for Q4, but stocks dip due to guidance for the 1st quarter Gold prices to remain up, reaching $3,000/oz in near-term, says Citi Pinterest projects revenue above estimates as AI tools boost ad spend; shares jump Companies wary of new US rule scramble to file mergers by Friday, lawyers say

Related

Business|Political|US

CEO of Politico’s parent company to Trump: ‘It’s not subsidies; it’s capitalism’

CEO of Politico’s parent company to Trump: ‘It’s not subsidies; it’s capitalism’

CEO of Politico’s parent company to Trump: ‘It’s not subsidies; it’s capitalism’
Business|Finance|Science|Stock Markets|Technology

Illumina forecasts 2025 revenue largely below estimates

Gene sequencing machine maker Illumina forecast 2025 revenue largely below Wall Street estimates on Thursday, signaling subdued demand for its genetic tests and diagnostic tools, sending

Illumina forecasts 2025 revenue largely below estimates
Business|Economy|Finance|Political|US

Treasury Secretary Scott Bessent wants to bypass the Fed to lower interest rates

Treasury Secretary Scott Bessent wants to bypass the Fed to lower interest rates

Treasury Secretary Scott Bessent wants to bypass the Fed to lower interest rates
Business|Finance|Political|Stock Markets|US

SEC lawyers exempt from Trump list request in possible firing reprieve, memo says

U.S.

SEC lawyers exempt from Trump list request in possible firing reprieve, memo says
Share This

Popular

Business|Economy|Lifestyle

Strong job market? Why this HR exec turned bathroom attendant isn’t feeling it

Strong job market? Why this HR exec turned bathroom attendant isn’t feeling it
Business|Finance|Political|Technology|US

DOGE was tasked with stopping Treasury payments to USAID, AP sources say

DOGE was tasked with stopping Treasury payments to USAID, AP sources say
Business|Science|Technology|US

Flying's gotten safer — and less reported on. Washington crash shows how the aviation beat is fading

Flying's gotten safer — and less reported on. Washington crash shows how the aviation beat is fading
Asia|Business|Economy

BOJ's fresh take on labour crunch opens door for more rate hikes

BOJ's fresh take on labour crunch opens door for more rate hikes