MercoPress. South Atlantic News Agency

Federal Reserve chairman Powell, “in no rush to begin cutting interest rates”

Powell said, and even though the numbers showed less of a slowdown than last year, “you won't see us overreacting.”

Despite an encouraging Personal Consumption Expenditure Index, PCE, Federal Reserve Chair Jerome Powell repeated on Sunday that the U.S. central bank isn’t in any rush to cut interest rates as policymakers await more evidence that inflation is contained.

The PCE index for February, which was released Friday, was “what we were expecting,” Powell said, and even though the numbers showed less of a slowdown than last year, “you won't see us overreacting.”

“The fact that the U.S. economy is growing at such a solid pace, the fact that the labor market is still very, very strong, gives us the chance to just be a little more confident about inflation coming down before we take the important step of cutting rates,” Powell said at an event at the San Francisco Fed.

Powell's comments were in line with his remarks after the Fed's policy meeting last week, in which he said higher-than-expected inflation in January and February had not changed the sense that price rises would keep falling this year to the central bank's 2% target.

U.S. Commerce Department data on Friday showed the PCE price index increased at a 2.5% annual rate in February, up from 2.4% in the prior month. The number excluding volatile food and energy prices rose 0.3% on a month-to-month basis, slightly faster than Powell anticipated when he said last week that core inflation would be ”well below“ 0.3% in February.

The Fed chief will have another opportunity this week to hone his message on the monetary policy outlook, with a second public appearance in the San Francisco Bay Area on Wednesday at Stanford University, where he will deliver prepared remarks.

”The overall message really hasn’t changed too much,” said Veronica Clark, an economist at Citigroup. “It seems like February inflation data came in line with how they were expecting, and that’s in line with more prints that they would be OK with.

”We’re in the mode now of just gaining a bit more confidence, a couple more months of data, and they’re still going to be willing to cut midyear,” she added.

“It’s good to see something coming in line with expectations,” Powell said of the data, adding that the latest readings aren’t as good as what policymakers saw last year.

Powell said officials expect inflation to continue falling on a ”sometimes bumpy path.” Fed officials held short-term interest rates at a more than two-decade high at that meeting, and a narrow majority penciled in three rate cuts for 2024.

Powell has said it would likely be appropriate for the Fed to ease policy ”at some point this year.” But he and other policymakers have made clear they’re approaching the first cut with caution, given the underlying strength of the economy and recent signs of persistent price pressures.

Inflation has eased substantially from a 40-year peak reached in 2022, decelerating at a particularly fast clip last year. That progress appeared to stall in January and February, with a pickup in consumer price growth.

Meanwhile, the U.S. economy has remained resilient despite high interest rates. Inflation-adjusted consumer spending topped all economists’ estimates in February, and employers are still hiring workers at a robust clip. Data out earlier this week showed economic growth in the fourth quarter was stronger than originally thought.