The time to lower the price of money is approaching but the time has not yet come.
This is the philosophy expressed by Jerome Powell, president of the United States Federal Reserve (Fed), in his appearance this Wednesday in Congress.
Although the US central bank plans to lower interest rates throughout this year, doing so this month, when the next meeting is held, is premature, the House economy committee insisted.
Powell reiterated that the Fed is not yet prepared to open the cuts, after eleven increases, since March 2022, to contain inflation, which has placed rates at 5.25-5.50%.
In his speech on Capitol Hill, he insisted that Federal Reserve governors remain very attentive to the dangers that inflation still poses and do not want to act too quickly.
“In considering any adjustment to the target range of rates, we will carefully assess incoming data, evolving outlooks and the balance of risks,” he said.
“The committee does not consider it appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%,” he stressed. 2% is the goal that the Fed has set as ideal for inflation. The consumer price index remained at 3.1% in January.
His comments showed once again that those responsible for the central bank remain concerned about the issue of not losing the ground gained on inflation, which climbed to 9.1% in June 2022. But he made it clear that the time to give Reversing its restrictive monetary policy will arrive in 2024.
“We believe that our rate policy has already peaked in this containment cycle. “If the economy broadly performs as expected, it will be appropriate to reduce political restraint at some point this year,” Powell promised.
He noted again, however, that lowering interest rates too quickly could mean losing the battle against inflation and probably having to raise rates even further. On the other hand, he accepted that waiting too long to reduce pressure represents a danger to economic growth.
There is great expectation in the markets to know when the Fed will begin to retreat from its aggressive attitude. At the last meeting of the Federal Reserve, held in January, the idea that the central bank is not in such a hurry began to be cemented.
