By Ann Saphir and Howard Schneider
DALLAS (Reuters) – Sustained economic growth, a solid labor market and inflation remaining above its 2% target mean the U.S. central bank does not need to rush to cut rates and can deliberate carefully, Chairman Jerome Powell said the Federal Reserve Thursday. .
In comments that echo evolving financial markets expectations of fewer rate cuts next year than previously forecast by Fed officials, Powell affirmed that he and his fellow policymakers continue to believe inflation is “on a sustainable path.” to 2%”, which means that the US central bank will move monetary policy “to a more neutral setting over time”.
But the pace of rate cuts “is not predetermined,” Powell said at a Fed meeting in Dallas, adding that “the economy is not signaling that we need to rush to cut rates.” economics gives us the opportunity to approach our decisions carefully.”
Fed officials and investors are taking stock of how continued U.S. economic strength and uncertainty surrounding President Donald Trump’s new administration’s economic agenda, especially on tax cuts, tariffs and an immigration crackdown , can affect economic growth and inflation.
After an election last week that may have changed voters’ perceptions of the country’s economic problems, Powell said the current situation was actually “remarkably good.”
The economy’s strengths include a still-low unemployment rate of 4.1%, growth at what Powell called a “strong” annual pace of 2.5%, which is still above Fed estimates of the underlying potential, consumer spending driven by rising disposable income, and growing business investment.
Still, key inflation measures remain above target.
The personal consumption expenditures price index for October has not yet been released, but Powell said recent contributing data indicates that the PCE, excluding food and energy costs, rose 2.8% last month – marking the fourth month would be a consecutive year in which the price index for personal consumption has risen. indicator is stuck.
The Fed uses the PCE figures to set its 2% inflation target – Powell said the figure was likely around 2.3% in October – while the “core” measure is considered a guide to the direction of inflation. underlying inflation.
Traders expect the Fed to cut rates by another quarter of a percentage point at its Dec. 17-18 meeting, but the combination of Trump’s election victory and persistent inflation data have them expecting fewer cuts next year.
