Federal Reserve Chair's Comments on Rate Cuts

Federal Reserve Chairman Jerome Powell stated that the economy does not indicate a need for rapid rate cuts. The current economic strength allows for a careful approach in monetary policy decisions.

> "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," Powell remarked.

His comments reflect sentiments shared by other Fed officials this week. Musalem also mentioned, in his speech to the Economic Club of Memphis, that the FOMC can evaluate incoming information patiently regarding policy rate adjustments.

Powell expressed confidence that the economy's strength and labor market can be sustained despite ongoing inflation challenges.

> "We are confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2 percent," he stated.

The Fed chief noted that inflation is likely to continue its downward trend. Data indicates a 2.3% rise in total PCE prices over the 12 months ending in October, with core PCE prices (excluding food and energy) rising 2.8%.

Powell reiterated the importance of balancing rate cuts, stating that moving too quickly could harm inflation progress, while moving too slowly could weaken economic activity and employment.

The current economic strength stems from two supply-side factors: increased productivity and labor supply, bolstered by a surge in immigration.

> "What we saw over 2023 and 2024 was a surge in immigration and also a surge in the labor force, and it certainly pushed up economic growth," Powell mentioned.