Powell Reaffirms "No Rate Cut in March"... "Approach with Caution" (Comprehensive)

Inflation Must Continue to Fall to 2%
No Dramatic Change in Interest Rate Cut Target
Fed Decision Not Influenced by Politics

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), expressed a cautious stance on the prospect of interest rate cuts this year. He assessed that the possibility of an early rate cut in March is low and emphasized that the Fed wants to gain more confidence through additional data.

On the 4th (local time), Chairman Powell appeared on the popular CBS program "60 Minutes" and stated, "I want to see more evidence that inflation is consistently falling to 2%. I want to have more confidence before taking significant steps to start cutting rates."

Jerome Powell, Chairman of the U.S. Federal Reserve [Photo by Yonhap News]

Powell optimistically evaluated that the current U.S. economic growth rate is high, inflation is declining, and the labor market and unemployment rate show solid indicators. Thanks to this, he explained that the Fed can approach the timing of rate cuts cautiously.

This reaffirmed what Powell said at the press conference following the January Federal Open Market Committee (FOMC) regular meeting held on the 31st of last month, where the benchmark interest rate was kept steady at 5.25?5.50%. At that time, he stated, "We are confident that inflation is steadily slowing toward the 2% target, but we need greater confidence," drawing a line under expectations for a rate cut in March.

He again dismissed the possibility of an early rate cut in March. Powell said, "We need to be confident that inflation will fall to 2%, and I think it is unlikely that we will reach that level before the meeting in March, which is seven weeks away." He also mentioned, "The time for rate cuts is approaching, but it may not be now."

When asked about the specific timing of rate cuts, he avoided a direct answer, saying, "It will depend on the data." He added, "We compare the risks of moving too quickly and moving too late and make real-time judgments. Based on what we expect, I want to say that the time is approaching." If the labor market slows down, the Fed may move faster, but if the inflation slowdown stalls, the pace of rate cuts could be slowed.

U.S. inflation indicators slowed to 2.6% as of the end of last year. Regarding future inflation fluctuations, he responded, "We expect it to continue to decline in the first half of this year." He also said, "The Fed is focused on the real economy and is doing the right thing for the economy and the American people in the medium to long term," emphasizing, "The importance of stabilizing inflation cannot be overstated."

Regarding the outlook for rate cuts, he said he does not expect dramatic changes. The Fed projected in December last year that lending rates would reach 4.6% by the end of this year. Powell said, "Most members of the Fed believe it is appropriate to cut rates this year," adding, "We try to choose the right timing considering the overall context."

Meanwhile, with the U.S. presidential election scheduled for November this year, there are concerns that political factors may influence the Fed's decisions. Rapid price increases have affected the national economy and also impacted President Joe Biden's approval ratings. The Republican Party points out that the Fed supports the Democratic Party through rate cuts. Donald Trump, a leading Republican candidate and former president, has also stated that he would not reappoint Chairman Powell if he wins re-election.

Powell said, "The Fed never considers politics when making decisions," adding, "The Fed is a non-political organization, and if political factors were integrated into decisions, it would lead to negative economic outcomes."