Federal Reserve Chair Jerome Powell told lawmakers Wednesday that the continued strength of the U.S. economy means that central bank officials can afford to move carefully as they consider cutting interest rates later this year.
Appearing before the House Committee on Financial Services, Powell cited the “strong pace” of growth over the last year, which occurred even as inflation “eased notably.” Still, the inflation rate remains too high for the Fed’s comfort, and the central bank wants to be sure that the current trend remains in place before committing to any stimulative rate cuts.
“We want to see a little bit more data so that we can become confident,” Powell said. “We’re not looking for better inflation readings than we’ve had. We’re just looking for more of them.”
If the data continues to move in the right direction, Powell said “it will likely be appropriate to begin dialing back policy restraint at some point this year.”
Powell added that the Fed is trying to balance the risks of moving too slowly or too quickly. “Reducing policy restraint too soon or too much could ... ultimately require even tighter policy to get inflation back to 2%,” he said. “At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
Powell will appear before a Senate panel on Thursday.
