Fed to decide “carefully and thoughtfully” when to lower rates this year

The president of the Federal Reserve of the United States (Fed), Jerome Powell, stated this Wednesday that the organization will decide “with care and consideration“When interest rates go down, a decision to be made”sometime this year”, once it is certain that inflation is reduced in a sustained manner.

“The committee would like to see more data that confirms and makes us feel more confident that inflation is coming down steadily to 2%. We have some confidence in that inflation”, noted the president of the regulator before the financial services committee of the House of Representatives.

He appeared there to explain the decisions on monetary policy, as he does by mandate every six months. On Thursday he will do the same in the Senate.

Powell is responding to some of the questions from legislators and has not yet given details about when rates will be lowered.

In his opening remarks, Powell confirmed that the rate “is probably at its peak during this cycle” and that if economic conditions allow it “it will probably be appropriate to start cutting rates sometime this year”, a message that he already launched in the regulator’s last press conference.

Always restrained in his interventions, aware that every word can cause strong movements in the stock markets, Powell remained faithful to the conservative discourse of the regulator, which has kept rates unchanged since its meeting in July 2023, in the range of 5.25 % to 5.5%, its highest level since 2001.

All of this after eleven increases carried out since March 2022 to control inflation, which exceeded 9% in the summer of that year.

Thus, Powell insisted that the Federal Open Market Committee (FOMC, in English) – the Fed’s body in charge of monetary policy – will not reduce interest rates until greater confidence has been gained that inflation is moving from sustainable way towards 2%, the Fed’s objective.

“Inflation has fallen markedly over the past year, but remains above the long-term target of 2%.”Powell insisted.

Thus, although the Fed has “some confidence“in the decline of inflation, wants to see”a few more details” for “be confident and take the step to start reducing“the types because”It is a very important step”.

The president of the regulator reviewed the economic activity of the United States, which “expanded at a strong pace last year,” with a growth in the Gross Domestic Product (GDP) of 3.1%, “driven by strong consumer demand and improving supply conditions”.