Jerome H. Powell, chairman of the Federal Reserve, made it clear during a “60 Minutes” interview that aired Sunday night that the central bank is moving to cut interest rates as inflation eases, but that policymakers should to see continued progress towards lower prices rising to make the first move.
Mr. Powell was interviewed on Thursday, after the Fed’s meeting last week but ahead of Friday’s jobs report. He reiterated his message that lower borrowing costs are coming. But he also said the Fed’s next meeting in March is probably too early for policymakers to feel confident enough that inflation is coming under control to cut rates.
“We think we can be cautious in approaching this decision just because of the strength we see in the economy,” Mr. Powell said during the interview, according to a transcript released ahead of its airing. He added that officials would like to see continued restraint in price increases, even after several months of softer readings.
Progress on inflation “doesn’t have to be better than what we’ve seen, or even as good. It just has to be good,” Mr. Powell said.
His remarks confirm that lower borrowing costs are likely to come this year – a change that could make mortgages, car loans and credit card debt cheaper for Americans. They also underscore how much better the current economic situation is turning out than economists and Fed officials expected just a year ago.
Many forecasters had predicted that the Fed’s rapid campaign of rate hikes, which pushed borrowing costs from near zero to a range of 5.25 to 5.5 percent from March 2022 to July 2023, would slowed the economy so much that it could even spur a recession. Central bankers themselves — including Mr. Powell — believed it would probably take some economic distress to reduce consumer and business demand enough to prompt businesses to stop raising prices so quickly.
Instead, employers are hiring quickly, unemployment is at a record low of 3.7 percent and wage gains have finally eclipsed price increases in recent months.
“I was honest in saying we thought there would be pain,” Mr Powell said in the interview broadcast on Sunday. “And we thought the pain would probably come, as it has in so many previous cycles, in the form of higher unemployment. That has not happened.”
But rising prices for many goods – including groceries – have combined with high borrowing costs and high housing prices to erode economic confidence. Mr. Powell acknowledged this unhappiness in his interview.
“I think people have been patient and have had a very difficult time,” he said. “And I think now we’re going through that time and we’re starting to feel a little bit better about things. “Mortgage rates have come down in anticipation, they’ve fallen a bit in anticipation of lower rates.”
Mr Powell was clear that the central bank’s policy decisions would not be affected by the presidential election later this year.
The Fed is a political talking point at times. Former President Donald J. Trump, who is running for re-election, has already begun criticizing the central bank, and Mr. Powell in particular, on the campaign trail. But the Fed is isolated from the White House and is intended to free policy from political influence. Its officials fiercely guard that level of independence, given the sometimes unpopular decisions they must make to cool the economy and stave off inflation.
Mr. Powell reiterated his commitment to that freedom from political influence in the interview.
“Integrity is priceless, and in the end, that’s all you have,” he said. “We intend to keep ours.”
