Federal Reserve Chairman Jerome Powell spoke for three hours Wednesday before the House Financial Services Committee as part of his biannual testimony to lawmakers.
Chairman Powell said a rate cut would likely be warranted “at some point” in 2024. The Fed chief reiterated a consistent message from Fed officials in recent weeks: They need more confidence that inflation is falling before cutting interest rates.
“If the economy progresses broadly as expected, it would be appropriate to begin tapering policy restraints at some point this year,” Powell told the House Financial Services Committee.
Michael Feroli, JPMorgan's chief U.S. economist, said in a note to clients that Powell's comments Wednesday were “not a huge surprise.”
Feroli added: “Overall, Chairman Powell has been quite cautious in avoiding sending any new signals about the direction of monetary policy. We expect new, complete data on inflation and employment to arrive before the next FOMC meeting. This is to be expected given the announcement.”
Oren Krachkin, a senior national economist, agreed, noting that Wednesday's testimony “didn't provide much new in terms of forward guidance.”
“While his comments suggest a rate cut is on the cards, the federal funds rate will remain unchanged until policymakers have more confidence in achieving their 2% inflation target,” Krachin said in a note to clients. Probably.''
Mr. Kurachkin is maintaining his base case for the Fed's first rate cut in June. The market consensus is that investors expect a 72% chance the Fed will cut rates at its June meeting, according to the CME FedWatch tool.
Powell is scheduled to testify before the Senate on Thursday.
