Jerome H. Powell, Chairman of the Federal Reserve, made clear during a “60 Minutes” interview broadcast Sunday evening that the central bank was moving toward cutting interest rates as inflation recedes, but that policymakers needed to see continued progress toward lower prices. increases to take the first step.
Mr. Powell was interviewed on Thursday, after last week’s Fed meeting but before Friday’s blockbuster jobs report. He reiterated his message that lower borrowing costs are coming. But he also said the Fed’s next meeting in March would likely be too early for policymakers to be confident enough that inflation is under control to cut rates.
“We think we can be cautious in approaching this decision just because of the strength we’re seeing in the economy,” Mr. Powell said in the interview, based on a transcript released before its release. He added that officials would like to see a continued moderation in price increases, even after several months of softer figures.
Progress on inflation “doesn’t have to be better than what we’ve seen, or even as good. It just has to be good,” Mr. Powell said.
His remarks reaffirm that lower borrowing costs are likely coming this year — a change that could make mortgages, auto loans and credit card debt less expensive for Americans. They also highlighted how the current economic situation is turning out to be much better than economists and Fed officials expected just a year ago.
Many forecasters had predicted that the Fed’s rapid interest rate hike campaign, which sent borrowing costs from near zero to a range of 5.25% to 5.5% between March 2022 and July 2023, would slow the economy so much that it could even trigger a recession. Central bankers themselves — including Mr. Powell — believed that some economic pain would likely be needed to cool consumer and business demand enough to prompt companies to stop raising prices so quickly.
Instead, employers are hiring quickly, unemployment is hovering at a historic low of 3.7 percent and wage increases have finally eclipsed the price increases of recent months.
“I was honest in saying that we thought there would be pain,” Mr. Powell said in the interview broadcast Sunday. “And we thought the pain would probably come, as it has in many past cycles, in the form of higher unemployment. This did not happen.
Yet high prices for many products – including groceries – have combined with high borrowing costs and high housing prices to erode economic confidence. Mr. Powell acknowledged this dissatisfaction during his interview.
“I think people have been patient and gotten through a pretty tough time,” he said. “And I think now we’re through that period and we’re starting to feel a little better about things. Mortgage rates have gone down in anticipation, gone down a little bit in anticipation of a rate cut.
Mr. Powell made clear that the central bank’s policy decisions would not be affected by the presidential election scheduled for later this year.
The Fed is sometimes a political talking point. Former President Donald J. Trump, running for re-election, has already begun criticize the central bank and Mr. Powell specifically on the campaign trail. But the Fed is isolated from the White House and is supposed to express policy free from political influence. Its officials vigorously protect this level of independence, given the unpopular decisions they sometimes have to make to cool the economy and fight inflation.
Mr. Powell reiterated his attachment to this freedom from political influence during the interview.
“Integrity is priceless, and at the end of the day, that’s all you have,” he said. “We plan to keep ours.”