“We’ve said you don’t want to wait until inflation gets down to two percent, because inflation has certain momentum,” Powell said in testimony to the US House Financial Services Committee.
“If you’ve waited this long, you’ve probably waited too long,” he added. In such a scenario, inflation will fall below the target level — which is also an undesirable outcome.
Powell was responding to a question about whether the Fed’s preferred measure of inflation, the personal consumption expenditure price index, would need to fall below two percent at least once in the next month before officials would consider a rate cut.
The central bank leader’s comments came a day after he noted that recent inflation readings showed “modest” progress, adding that “better data” would boost confidence that price rises are cooling sustainably.
To counter rising inflation, the Fed raised benchmark lending rates to decade highs in recent years in hopes of easing demand.
In recent months, policymakers have kept rates at a 23-year high. While inflation has peaked, its downward progress has somewhat stalled.
On Wednesday, Powell told lawmakers that he was not yet ready to express confidence that inflation would continue to fall below two percent.
Asked about the Fed’s political independence, Powell added that this is important to the central bank’s ability to operate and to sustain public confidence across the political spectrum.
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