With less restrictive monetary policy and a continued strong economy, the Federal Reserve will not rush to further reduce interest rates, Chair Jerome H. Powell told lawmakers Feb. 11.
“We do not need to be in a hurry to adjust our policy stance,” Powell said in testimony before the Senate Banking Committee.
“We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
The Federal Open Market Committee at its last meeting Jan. 29 left the federal funds rate unchanged at a range of 4.25% to 4.5%.
The decision, which was unanimous among the committee’s 12 members, came after three successive rate cuts to close out 2024 — quarter-point cuts in December and November, and a half-point reduction in September.
As the economy evolves, Powell said the Fed will adjust its policy stance in a manner that best promotes its maximum-employment and price-stability goals.
“If the economy remains strong and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer,” he said. “If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly. We are attentive to the risks to both sides of our dual mandate, and policy is well positioned to deal with the risks and uncertainties that we face.”
The U.S. economy created 143,000 jobs in January, well below December’s upwardly revised figure of 307,000 and below economists’ expectations.
Also, the consumer price index rose an annualized 2.9% in December from a year earlier, above the 2.7% figure recorded in November, and also above forecasts.
During a line of questions from Sen. Jack Reed, D-R.I., Powell declined comment when asked about President Donald Trump’s tariff policies.
"It’s not the Fed’s job to make or comment on tariff policy” Powell said. The Fed’s job is to “try to react to it in a thoughtful, sensible way and try to make monetary policy so that we can achieve our mandate.”
The Fed’s next meeting is March 18-19.
