by Federal Reserve Chairman Jerome H. Powell made clear during a “60 Minutes” interview broadcast Sunday night that the central bank is moving toward cutting interest rates as inflation recedes, but that policy makers need to see continued progress towards lower prices. increases to take the first step.
Powell was interviewed Thursday, after last week’s Federal Reserve meeting but before Friday’s blockbuster jobs report. He reiterated his message that lower borrowing costs are on the way. But he also said the next Federal Reserve meeting in March is probably too soon for policymakers to feel confident enough that inflation is under control to cut rates.
“We think we can be careful in making this decision just because of the strength we’re seeing in the economy,” Powell said during the interview, based on a transcript released before it aired. He added that officials would like to see a continued moderation in price increases, even after several months of softer readings.
Progress on inflation “doesn’t have to be better than what we’ve seen, or even as good. It just has to be good,” Powell said.
His comments reaffirm that lower borrowing costs are likely to come this year, a change that could make mortgages, auto loans and credit card debt cheaper for Americans. They also underscore that the current economic situation is turning out much better than economists and Federal Reserve officials expected just a year ago.
Many forecasters had predicted that the Federal Reserve’s rapid campaign of interest rate hikes, which raised borrowing costs from near zero to a range of 5.25 to 5.5 percent between March 2022 and July 2023 , would slow the economy so much that it could even cause a recession. Central bankers themselves (including Powell) believed that it would probably take some economic pain to cool consumer and business demand enough to prompt companies to stop raising prices so quickly.
Instead, employers are hiring quickly, unemployment hovers around a historically low 3.7 percent, and wage increases have finally eclipsed price increases in recent months.
“I was being honest in saying that we thought there would be pain,” Powell said in the interview broadcast Sunday. “And we thought the pain would probably come, as it has in so many past cycles, in the form of higher unemployment. “That hasn’t happened.”
Still, high prices for many products (including groceries) have combined with high borrowing costs and high housing prices to erode economic confidence. Powell acknowledged that discontent in his interview.
“I think people have been patient and have had a pretty difficult time,” he said. “And I think we’re getting over that now and starting to feel a little better about things. “Mortgage rates have gone down in anticipation, they have gone down a little bit in anticipation of lower rates.”
Powell was clear that the central bank’s policy decisions would not be affected by this year’s presidential election.
The Federal Reserve is sometimes a topic of political conversation. Former President Donald J. Trump, who is running for re-election, has already begun criticize the central bank, and Mr. Powell specifically, on the campaign trail. But the Federal Reserve is isolated from the White House and its goal is to free policy from political influence. Its officials vigorously protect that level of independence, given the unpopular decisions they sometimes have to make to cool the economy and guard against inflation.
Powell reiterated in the interview his dedication to that freedom of political influence.
“Integrity is priceless, and in the end, that’s all you have,” he said. “We plan to keep ours.”
