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Jerome H. Powell, the Federal Reserve chair, told lawmakers that rate cuts in 2024 were still likely and that hot-button bank rules could be reissued.
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Federal Reserve Expects to Lower Interest Rates Later This Year
Jerome H. Powell, the chair of the Federal Reserve, said that cuts in borrowing costs could be possible in 2024 if the data continued to signal a control on inflation.
We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2 percent objective for inflation is not assured. Reducing policy restraint too soon or too much could result in a reversal of progress we’ve seen in inflation, and ultimately require even tighter policy to get inflation back to 2 percent. At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment. While inflation remains above the FOMC’s objective of 2 percent, it has eased substantially and the slowing in inflation has occurred without a significant increase in unemployment. The labor market remains relatively tight, but supply-and-demand conditions have continued to come into better balance. In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook and the balance of risks. The committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.
Jerome H. Powell, the chair of the Federal Reserve, said on Wednesday that he thought the central bank would begin to lower borrowing costs in 2024 but that policymakers still needed to gain “greater confidence” that inflation was conquered before making a move.
“We believe that our policy rate is likely at its peak for this tightening cycle,” Mr. Powell said during testimony before the House Financial Services Committee. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”
Mr. Powell’s comments on economic policy were largely in line with what markets have been expecting. Policymakers raised interest rates in 2022 and 2023 to slow growth and bring inflation under control, and they have been signaling for months that they could soon begin to lower those rates as price increases cool. Fed officials have also been clear that they do not want to begin cutting borrowing costs prematurely, and have kept their options open on timing.
But while Mr. Powell said little that was new about the rate outlook, he made significant news on another topic: bank regulation.
In addition to guiding the economy with its interest rate policies, the Fed oversees the nation’s largest banks with an eye on maintaining financial stability. During his testimony on Wednesday, Mr. Powell faced a volley of questions about major bank regulations that the Fed and other regulators proposed last year, called “Basel III Endgame.”
The Fed chair signaled that major changes were coming to the proposed rules, and that it was a “very plausible option” that regulators could reissue them altogether, something that lobbyists representing America’s largest banks have pushed for vociferously.
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