Prospects for achieving inflation target uncertain, Fed in no rush to cut interest rates

The Fed has raised its benchmark lending rate to a 23-year high, a move that has helped push inflation down from its highest levels in decades and closer to its long-term 2% target. But inflation could still rise as recent data show the path to that goal is bumpy.

In a new statement delivered ahead of a two-day hearing before a US House committee in Washington, Mr. Jerome Powell made it clear that if the economy develops as forecast, it would be appropriate to adjust interest rate policy at some point this year. However, the economic outlook is unclear, making it difficult to ensure solid progress in efforts to bring interest rates back to the 2% target.

At a hearing before the House Financial Services Committee, Mr. Powell is likely to answer questions about when the Fed will start cutting interest rates. In December 2023, Fed policymakers outlined a plan to implement three interest rate cuts in 2024 but did not specify a specific time frame. So far, the Fed has not made any moves related to this widely expected plan, and has warned against acting too hastily, which could cause inflation to rise again.

In prepared remarks for the hearing, Mr. Powell said the Fed's policy-making committee also believes it would be inappropriate to cut interest rates without certainty that inflation will gradually decline to 2%. The Fed has always been persistent in pursuing its goal of lowering interest rates. According to a survey by CME, the market rates a 70% chance that the Fed will start cutting interest rates around mid-June.