Federal Reserve Chair Jerome Powell said Tuesday that it will likely “take longer than expected” for the central bank to gain the confidence that inflation is sustainably falling to 2 percent and begin cutting interest rates.
“More recent data show solid growth and continued strength in the labor market but also a lack of further progress so far this year on returning to our 2 percent inflation goal,” Powell said during remarks at the Washington Forum on the Canadian Economy.
“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he later added.
The Fed raised interest rates to a two-decade high over the past two years in an effort to bring down inflation. The central bank has held rates at a baseline range of 5.25 to 5.5 percent since last July as inflation showed signs of cooling.
Despite falling from a 40-year high of 9.1 percent in June 2022, inflation has ticked higher in recent months. According to new data released Wednesday, inflation rose 0.4 percent in March and 3.5 percent year-over-year, up slightly from 3.2 percent in February and 3.1 percent in January.
The U.S. has also seen rapid job growth throughout 2024 as joblessness remains below 4 percent for the longest streak since the late 1960s.
President Biden acknowledged last week that the latest inflation data could push back the Fed’s rate cuts, while touting the administration’s overall progress on inflation.
“This may delay it a month or so, I’m not sure of that. We don’t know what the Fed is going to do for certain,” Biden said.
“But look, we have dramatically reduced inflation from 9 percent down to close to 3 percent,” he added. “We’re in a situation where we’re better situated than we were when we took office, where inflation was skyrocketing.”