Powell Says Fed Will Likely Cut Rates Cautiously Given Persistent Inflation Pressures
The Federal Reserve is likely to raise interest rates in the coming months, but the pace of increases will be cautious due to persistent inflation pressures, Fed Chair Jerome Powell said Wednesday.
Powell's comments came during a speech at the Economic Club of Washington, D.C. He said that the Fed is committed to bringing inflation down to its 2% target, but that it will do so gradually to avoid harming the economy.
"We're not going to be overly aggressive," Powell said. "We're going to be cautious and feel our way through this."
The Fed has already raised interest rates twice this year, and it is widely expected to raise rates again at its next meeting in May. However, Powell's comments suggest that the Fed is not planning to raise rates as aggressively as it did in the past.
Powell's cautious approach is likely due to the fact that inflation is still running at a high level. The consumer price index rose by 8.5% in March, the largest increase since 1981.
The Fed is concerned that if it raises rates too quickly, it could slow the economy too much and lead to a recession. Powell said that the Fed is "not trying to engineer a recession," but that it is "prepared to do what it takes" to bring inflation down.
Powell's comments were well-received by the markets. The Dow Jones Industrial Average rose by more than 1% after his speech.
Here are some key takeaways from Powell's speech:
- The Fed is likely to raise interest rates in the coming months, but the pace of increases will be cautious.
- The Fed is committed to bringing inflation down to its 2% target.
- The Fed is concerned about the impact of raising rates too quickly on the economy.
- The Fed is prepared to do what it takes to bring inflation down.
