\n<\/div><\/div>\n<\/div>\n<\/div>\n

By Christopher Rugaber<\/div><\/div>\n

The Federal Reserve chair said the Fed misjudged the duration of the 2021-2022 inflation surge, and the central bank moved too slowly to raise its key rate. Rate cuts could begin in May.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<\/div>\n

WASHINGTON \u2014 Chair Jerome Powell said in an interview broadcast Sunday night that the Federal Reserve remains on track to cut interest rates three times this year, a move that’s expected to begin as early as May.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Powell, in an interview recorded Thursday for the CBS news program \u201c60 Minutes,\u201d also said the nation’s job market and economy are strong, with no sign of a recession on the horizon.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\u201cI do think the economy is in a good place,” he said, \u201cand there\u2019s every reason to think it can get better.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Powell’s comments largely echoed remarks he gave at a news conference Wednesday, after the Fed decided to keep its key interest rate steady at about 5.4%, a 22-year high. To fight inflation, the Fed raised its benchmark rate 11 times beginning in March 2022, causing loans for consumers and businesses to become much more expensive.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

The Fed chair also reiterated that the central bank’s next meeting in March was likely too soon for a rate cut. Most economists think the first cut is likely to come in May or June.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

With inflation steadily cooling, nearly all the 19 members of the Fed’s policy-setting committee have agreed that cuts in the central bank’s key rate will be appropriate this year, Powell said in the \u201c60 Minutes\u201d interview. A reduction in that rate would help lower the cost of mortgages, auto loans, credit cards and other consumer and business borrowing.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

In December, Fed officials indicated that they envisioned three rate cuts in 2024, reducing their benchmark rate to about 4.6% by year’s end. Powell told \u201c60 Minutes\u201d that that forecast likely still reflected policymakers’ views.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

As gauged by the Fed\u2019s preferred measure, inflation fell to just 2.6% in December compared with 12 months earlier. And in the second half of 2023, inflation was measured at an annual pace of just 2%, matching the Fed\u2019s target level, down drastically from a peak of 7.1% in the summer of 2022.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Powell attributed the inflation surge of 2021-2022 to the disruptions of the pandemic, including a shift in spending away from services, like restaurant meals, to goods, like home office furniture and exercise bikes. At the same time, COVID closed down or slowed factories across the globe, severely disrupting supply chains and causing widespread shortages of goods and components. Both trends, Powell said, accelerated inflation.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

At the same time, Powell acknowledged in the interview, the Fed misjudged the duration of the resulting inflation, which it repeatedly suggested would prove short-lived. As he has before, Powell said the central bank moved too slowly to raise its key rate, which can help slow borrowing and spending. Inflation began spiking in mid-2021 yet the Fed didn’t start raising rates until March 2022.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\u201cSo in hindsight, it would\u2019ve been better to have tightened policy earlier,\u201d Powell said, referring to rate hikes. \u201cI\u2019m happy to say that. … We thought that the economy was so dynamic that it would fix itself fairly quickly. And we thought that inflation would go away fairly quickly without an intervention by us.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

At his news conference Wednesday, Powell signaled that the Fed was likely to cut rates this year but underscored that central bank officials wanted to see further evidence that inflation is in check.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\u201cIt\u2019s not that we\u2019re looking for better data \u2014 it\u2019s just that we\u2019re looking for a continuation of the good data that we\u2019ve been getting,\u201d he said. \u201cWe just need to see more.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Also Wednesday, Powell repeatedly acknowledged the strength of the U.S. economy and noted that inflation had slowed without the sharp rise in unemployment and weak growth that many economists had said would be necessary to cool consumer demand and slow price increases.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\u201cWe\u2019ve got six months of good inflation data and an expectation that there\u2019s more to come,\u201d Powell said Wednesday. \u201cSo, this is a good situation. Let\u2019s be honest. This is a good economy.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Other Fed officials have expressed caution about the prospect of rate cuts, particularly after a government report Friday showed that job growth soared unexpectedly in December, a sign that businesses remain confident enough in the economy to add many workers.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Michelle Bowman, a member of the Fed\u2019s Board of Governors, said Friday that once it was clear that inflation was in check, it would eventually become appropriate to cut rates.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\u201cIn my view,” she said, \u201cwe are not yet at that point.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

<\/p>\n

\n \u2715<\/span><\/p>\n

\n
\n ADVERTISEMENT<\/span> <\/p>\n

<\/p>\n

<\/p><\/div>\n<\/div>\n<\/section>\n

<\/p>\n

Go to Source<\/a>
\nAuthor: amyc<\/p>\n","protected":false},"excerpt":{"rendered":"