As inflation cools, Powell says it's too early to speculate on rate cut

While inflation has shown further signs of cooling and the U.S. economy remains on stable footing, the Federal Reserve isn't yet claiming victory and will continue to follow the data in making future policy decisions, Fed Chairman Jerome H. Powell said Dec. 1.

The Federal Open Market Committee is "strongly committed to bringing inflation down to 2% over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective," Powell said during an event at Spelman College in Atlanta. "It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so."

The committee at its last meeting Nov. 1 left the federal funds rate unchanged at a range of 5.25% to 5.5%. The Fed began raising the funds rate in March 2022, and it is now at its highest level since 2001 at 525 basis points.

Shortly after Powell's remarks, market participants indicated there is a 97.8% probability that the Fed will leave rates unchanged at its next meeting Dec. 12-13, according to the CME FedWatch Tool that tracks trading in the 30-day fed funds futures.

Powell noted that over the six months ended in October, core inflation ran at an annual rate of 2.5%, but while "the lower inflation readings of the past few months are welcome, that progress is going to need to continue if we are to reach our 2% objective."

He added, "Having come so far and so quickly, the FOMC is moving carefully forward, as the risks of under- and over-tightening are becoming more balanced."

Of note, the Bureau of Labor Statistics reported Nov. 14 that the consumer price index rose 3.2% from a year ago in October, down from the 3.7% figure recorded in September.

During a question-and-answer session with Spelman College President Helene D. Gayle, Powell said the Fed will let the incoming data "reveal the appropriate path. We don't need to be in a rush now having moved quickly and forcefully, we're getting what we wanted to get, we now have the ability to move carefully."

At its Dec. 12-13 meeting, the committee will publish updated forecasts for interest rates, inflation, gross domestic product and other economic indicators. Market participants will be interested to see when the first rate cut could come in 2024.