Federal Reserve Chair Jerome H. Powell is optimistic that the central bank could continue lowering interest rates while inflation nears its target, though there are still lingering economic uncertainties.
The Fed is moving policy over time to a more neutral setting, but “the path for getting there is not preset,” Powell said Nov. 14 at an event hosted by the Dallas Regional Chamber, the Federal Reserve Bank of Dallas and the World Affairs Council of Dallas/Fort Worth.
“In considering additional adjustments to the target range for the federal funds rate, we will carefully assess incoming data, the evolving outlook and the balance of risks,” Powell added. “The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully. Ultimately, the path of the policy rate will depend on how the incoming data and the economic outlook evolve.”
The Federal Open Market Committee at its Nov. 7 meeting approved a quarter-point interest rate cut, a move that followed a half-point cut at its September meeting.
The Bureau of Labor Statistics on Nov. 13 reported that the consumer price index rose in October an annualized 2.6% from a year earlier, above the 2.4% figure recorded in September.
“Inflation has eased substantially from its peak, and we believe it is on a sustainable path to our 2% goal,” Powell said.
During a question-and-answer session, Powell was asked how policy issued by the incoming Trump administration and Republican-controlled Congress, such as tariffs and tax cuts, could impact future Fed decision-making. Many of the provisions in the Republican’s 2017 Tax Cut and Jobs Act will expire in late 2025.
Powell said it’s too early to judge how such policies could impact the economy and the Fed’s dual mandate of maximum employment and price stability.
“I think we have time to make assessments about what the net effects of policy changes will be on the economy before we react with policy,” Powell said. “That’s not to say we won’t be doing quite a lot of analysis.”
Later, Powell declined to speculate how mass deportations could impact the economy, but was then asked, “What does it mean if the workforce shrinks?”
In response, Powell said, “I think we can do the arithmetic: If there are fewer workers, there’ll be less work done. I just don’t want to go there. This is getting me into political issues that I really want to stay as far away from as I possibly can.”
