A strong economy is giving Federal Reserve officials room to move “carefully” as they lower interest rates, the central bank chair said.

A man in a gray suit with a lavender tie smiles while sitting in a white chair on a stage with a blue wall behind him.
Jerome Powell, chair of the Federal Reserve, said Thursday that moderating inflation and a strong economy could allow the central bank to take time cutting rates. Credit…LM Otero/Associated Press

By Jeanna Smialek
Nov. 14, 2024

Jerome H. Powell, the chair of the Federal Reserve, said that a solid economy with low unemployment, robust consumer spending and strengthening business investment gave the central bank room to take its time in cutting interest rates.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Mr. Powell said during a speech in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

The Fed is trying to navigate a complicated moment. The economy remains healthy overall, but the job market has slowed over the past year. Inflation has also been cooling steadily. Between the two developments, central bankers have decided that they no longer need to tap the brakes on the economy quite so hard.

After lifting interest rates sharply in 2022 and 2023 in a bid to cool the economy and wrestle rapid inflation back under control, they have begun to lower borrowing costs in recent months.

But officials still want to make sure that they fully stamp out rapid inflation. Price increases have cooled substantially from their 2022 peak, but they have not completely returned to the central bank’s 2 percent goal. Prices climbed 2.1 percent in the year through September, and are on track to come in a bit above that in October, based on other recent data reports.

Mr. Powell made it clear that Fed officials expected to see limited progress on inflation in the next few months.

“Core measures of goods and services inflation, excluding housing, fell rapidly over the past two years and have returned to rates closer to those consistent with our goals,” he said. “We expect that these rates will continue to fluctuate in their recent ranges.”

He added that central bankers were not declaring victory at a moment when price increases remained slightly elevated.

“Inflation is running much closer to our 2 percent longer-run goal, but it is not there yet,” Mr. Powell said. “We are committed to finishing the job.”

For investors, the question is whether slightly sticky inflation and strong growth will be enough to prod Fed officials to slow the pace of rate cuts, or to prod policymakers to make fewer rate cuts in the longer term.

The Fed’s policy-setting committee meets next in mid-December, and while policymakers are expected to lower rates by a quarter point at that gathering, Fed officials themselves have made it clear that a reduction is not guaranteed.

Mr. Powell did not address December specifically in his prepared remarks. But officials have made it clear that they will be watching incoming data points — including inflation and jobs figures — as they decide what to do.

“The path for getting there is not preset,” Mr. Powell said on Thursday. “In considering additional adjustments to the target range for the federal funds rate, we will carefully assess incoming data, the evolving outlook, and the balance of risks.”

Still, he suggested there is a clear reason to cut interest rates from their current level — a range of 4.5 to 4.75 percent — over the months ahead.

“The economy is doing very well, and that’s a great thing — we totally welcome that,” Mr. Powell said during a question-and-answer session after his prepared remarks. “But look at the labor market.”

He noted that joblessness has moved up, and by many indicators the job market is still cooling.

Still, Mr. Powell said that Fed officials will be closely watching incoming inflation and jobs data as they head toward their December meeting.

“We’re mindful of the risk that we go too far, too fast — but also of the risk that we don’t go far enough,” he said. “It seems like we’re right where we need to be.”

He said that “we can take the process of reducing rates — we can be careful about that.”

Mr. Powell also faced several questions about the recent election of Donald J. Trump, in part because Mr. Trump has proposed policies that could stoke growth and inflation. Mr. Powell said “it’s too early to reach judgments” about exactly how those policies will play through the economy.

Mr. Trump has a history of criticizing the Fed chair, and he even considered firing Mr. Powell during his first stint in the White House. While Mr. Trump has more recently suggested in interviews that he will probably not try to fire Mr. Powell, investors and economists are still on the lookout for any potential curbs to the central bank’s independence.

Asked whether he would consider remaining on the Fed Board as a governor when his term as chair lapses in 2026, Mr. Powell said that he would serve to the end of his leadership term, but that he hadn’t made decisions beyond that.

“We’re very focused on getting the job done for the American people,” he said.

His term on the Fed’s seven-member Board of Governors extends until 2028.

Jeanna Smialek covers the Federal Reserve and the economy for The Times from Washington. More about Jeanna Smialek

A version of this article appears in print on Nov. 15, 2024, Section B, Page 1 of the New York edition with the headline: Fed Chair In No Rush To Cut Rates. Order Reprints | Today’s Paper | Subscribe
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