Federal Reserve Chair Jerome Powell emphasized a measured approach to interest rate reductions, citing the robust state of the U.S. economy. Speaking at the New York Times DealBook Summit, Powell highlighted the central bank’s ability to proceed cautiously in aligning rates with a neutral level that neither stimulates nor slows economic growth.
“We have the capacity to take a more cautious approach as we work to identify the neutral rate,” Powell said during his interview with Andrew Ross Sorkin on Wednesday.
Powell attributed the Fed’s cautious stance to stronger-than-expected economic growth, a solid labor market, and slightly elevated inflation. “The economy is performing better than anticipated in September,” he explained. “The labor market remains robust, and inflation is running a bit higher.”
This appearance marked Powell’s last public commentary before the Fed’s upcoming meeting on December 17-18. The central bank initiated its rate-cutting cycle in September with a significant 50-basis-point reduction, followed by a smaller 25-basis-point cut in early November.
Since then, however, expectations for aggressive rate cuts have softened due to data reflecting sustained economic strength. Analysts suggest that upcoming reports, including the nonfarm payrolls data scheduled for release on Friday, will play a critical role in shaping the Fed’s next steps.
Despite a modest decline in private payroll growth for November, economists maintain confidence in the overall resilience of the labor market. This optimism reinforces the Fed’s commitment to a gradual and data-driven approach to monetary policy adjustments.
