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Powell cites a solid economy and will cut rates at a slower pace “carefully”.
 

Fed Will Move Carefully

The Wall Street Journal reports Powell Says Solid Economy Allows Fed to Consider Rate Cuts ‘Carefully’

Federal Reserve Chair Jerome Powell said recent signs of economic health would allow the central bank to take its time in deciding how quickly to continue reducing interest rates, including by potentially slowing down the pace of cuts.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said at a talk in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

Federal Reserve Chair Jerome Powell said recent signs of economic health would allow the central bank to take its time in deciding how quickly to continue reducing interest rates, including by potentially slowing down the pace of cuts.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said at a talk in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

Inflation reports released this week were slightly higher than officials expected, Powell said. “We’re going to tear this report apart and look at all the details,” he said. Still, he repeated his view that inflation was likely to continue to move lower, “albeit on a sometimes-bumpy path.”

Powell repeated his view that it was too soon to say how policy changes by President-elect Donald Trump and a Republican-led Congress next year might reshape the outlook for economic activity and interest rates.

Trump has said he intends to raise or impose new tariffs to boost domestic production. Powell said it was difficult to model the effects of any new tariffs, though he allowed that the current situation differed from an episode in 2018-19, when Trump launched a trade war with China. 

Back then, inflation was low, and consumers and businesses didn’t have any recent memory of being asked to accept notable price hikes. “We’re in a different situation,” Powell said.

I am not surprised by any of this, as mentioned in two recent posts.

CPI Rises 0.2 Percent But Another Hot Month for Shelter

November 13:  CPI Rises 0.2 Percent But Another Hot Month for Shelter

The Fed will have a tough go of things if there is lack of progress on the cost of shelter.

November 14: Producer Price Index (PPI) Increases 0.2 Percent, With Services Up 0.3 Percent

PPI service prices, which the Fed is more concerned about, are not headed in the right direction.

Neither the CPI nor the PPI reports should inspire confidence in a mass of rate cuts by the Fed.

And today Powell said the same thing.

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