Fed Chair Jerome Powell tells congress there's no rush to cut rates, citing inflation and job market strength
US Federal Reserve Chair Jerome Powell told the Senate Banking Committee on Tuesday that the US economy remains “strong overall,” with a “solid” labour market and inflation still above the Federal Reserve’s 2 percent goal.
According to CNBC, he reaffirmed the American central bank’s commitment to lowering inflation and made it clear that policymakers are not in a rush to cut interest rates.
“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said.
“We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
Powell’s remarks came as part of his two-day testimony before Congress, where he appeared before the US Senate Banking Committee on Tuesday and was set to address the House Financial Services Committee on Wednesday.
Following his comments, stocks briefly dipped before stabilizing after two hours of trading.
Lawmakers spent much of the session discussing bank supervision rather than monetary policy.
Senator Elizabeth Warren criticized US President Donald Trump’s decision to halt the work of the Consumer Financial Protection Bureau (CFPB), arguing that it left consumers unprotected.
When she asked Powell who is responsible for administering consumer compliance outside the CFPB, he responded, “I can say no other federal regulator.”
Despite this, Powell stated that the broader banking system remains stable and added that the Federal Reserve is “determined to take a fresh look at” the concerns Trump raised regarding de-banking.
Powell’s stance on monetary policy remained consistent with previous statements from the Federal Reserve. Policymakers are evaluating several fiscal and economic factors in a period of uncertainty.
Trump has launched an aggressive push for tariffs on the US’s largest trading partners, arguing they are necessary both to level the economic playing field and enforce foreign policy objectives, particularly on illegal immigration and fentanyl smuggling.
Powell did not address these issues in his prepared remarks but was expected to face questions from lawmakers.
During the hearing, Powell emphasized that trade policy does not fall under the Federal Reserve’s jurisdiction.
“I think the standard case for free trade and all that logically still makes sense. It didn’t work that well when we have one very large country that doesn’t really play by the rules,” he said.
“In any case, it’s not the Fed’s job to make or comment on tariff policy. ... That’s for elected people and it’s not for us to comment. Ours is to try to react to it in a thoughtful, sensible way and make monetary policy so that we can achieve our mandate.”
Recent signals from the Federal Reserve suggest that interest rates will remain unchanged at least until the summer. The American central bank had already cut its benchmark rate by a full percentage point in late 2024.
Powell stated that the current policy stance, with the federal funds rate between 4.25 percent and 4.5 percent, allows for flexibility.
The Federal Open Market Committee maintained this rate during its January meeting.
“We are attentive to the risks to both sides of our dual mandate, and policy is well positioned to deal with the risks and uncertainties that we face,” Powell said.
Shortly after taking office, Trump demanded an immediate interest rate cut but later expressed support for the Federal Reserve’s decision to hold rates steady in January.
Treasury Secretary Scott Bessent stated that the administration is more focused on lowering the 10-year Treasury yield than on Federal Reserve actions, which have a stronger effect on short-term rates.
Despite the Federal Reserve’s rate cuts, mortgage rates have remained high.
Powell addressed this issue, explaining that long-term bond rates play a bigger role than Federal Reserve policy.
“It’s true that mortgage rates have gone or remained high, but that’s not so directly related to the Fed’s rate,” he said.
“It’s really related more to long-term bond rates, particularly the Treasury, the 10-year Treasury, 30-year Treasury, for example. And those are high for reasons not particularly closely related to Fed policy.”
Powell noted that mortgage rates could decline if the Federal Reserve keeps rates low but did not specify when that might happen.
