Key Points

  • Federal Reserve Chair Jerome Powell said Monday that the central bank does not feel it needs to cut borrowing costs quickly and signaled that the size of future rate cuts will depend on the pace of economic growth.
  • Speaking in a webcast for the National Association for Business Economics, Powell said the rate-setting Federal Open Market Committee is "not in a hurry to cut rates quickly."
  • "If the economy slows more than we expect, then we can cut faster; if it slows less than expected, we can cut slower," he said in response to questions. "What we're focused on is a process that needs to unfold over time, not something that needs to move quickly."

In-Depth Analysis

The Federal Open Market Committee cut the federal funds rate by half a percentage point on September 18, to a range of 4.75% to 5%, and along with other central bank officials projected that the rate would fall to 4.4% by December and 3.4% by the end of next year, according to their median forecasts.

Fed Governor Michelle Bowman, the sole dissenter in the FOMC decision, reiterated Monday that she believes other policymakers underestimate inflation risks and argued that the benchmark rate should have been cut by only a quarter of a percentage point.

According to data released Friday by the Bureau of Economic Analysis, the core personal consumption expenditures price index, which excludes volatile food and energy prices, rose 2.7% year over year in August, up from 2.6% in July and well above the central bank's 2% target.

"While it is important to recognize the substantial progress made in reducing inflation, core inflation remains at or above around 2.5%, and I believe that a larger policy action by the committee could be interpreted as prematurely declaring victory on the price stability mission," Bowman said in a speech.

The Fed's projections for the future path of the federal funds rate align with the forecasts from a panel of 32 economists in a September survey released Monday by the National Association for Business Economics.

The National Association for Business Economics said nearly two-thirds of panelists believe the FOMC's rate cut at its most recent meeting was "well-timed," while a quarter think policymakers acted too late.

"39% of panelists cited monetary policy mistakes as the biggest downside risk," NABE President Ellen Zentner said in a statement, noting that the outcome of the November 5 presidential election and the wars in Ukraine and the Middle East were tied as the second-largest risks.

Powell said the Fed's decision to begin easing monetary policy in September was based on confidence in the economic outlook.

"We are recalibrating policy to maintain the strength of the economy, not because the economy is weak," he said.

"What we see is solid growth in the economy and a solid labor market," Powell said.

Although the labor market is healthy, it "has indeed cooled," he said. Powell noted that wage growth has slowed over the past few months, the rate of workers quitting has declined, and job openings have moved closer to the number of unemployed.