Key Points:

  • Federal Reserve Chair Jerome Powell said Tuesday that the central bank does not need to rush to lower its benchmark interest rate, given a strong job market and solid economic growth.
  • "We do not need to be in a hurry to adjust our policy stance," Powell said during testimony before the Senate Banking Committee. He also noted that "economic activity continues to expand at a solid pace," and emphasized that "labor market conditions remain strong."
  • When asked about economic risks, Powell declined to comment on the recent tariffs imposed by the Trump administration but warned of the dangers of the growing federal debt. "As my predecessors and I have said, the U.S. federal budget is on an unsustainable path. Now is the time to address this issue," Powell said.

Deeper Analysis:

The Fed paused its monetary easing last month after cutting rates by a full percentage point between September and December. Policymakers noted that while inflation has fallen from four-decade highs, it has yet to return to the 2% target.

Powell acknowledged the persistence of inflation on Tuesday, saying it is "still slightly above target."

Cleveland Fed President Beth Hammack echoed Powell's views in remarks Tuesday, saying policymakerscannot declare victory over inflation。

"We have made good progress, but the 2% inflation goal is not yet in sight," Hammack said. "As long as the labor market remains healthy, before further adjusting policy, I will look for broad evidence that inflation is sustainably returning to 2%."

Policymakers' efforts to curb inflation have stalled for months. According to the Bureau of Economic Analysis, the Fed's preferred inflation gauge—the core personal consumption expenditures price index—rose 2.8% last year.

Powell reiterated Tuesday that uncertainty over the details and impact of the Trump administration's policies has prompted the central bank to hold off on further rate cuts. He highlighted potential changes in tariffs, immigration, regulation, and fiscal policy.

Powell said any new approach by the United States on these issues "will be factored into our thinking as we sort through it and make the best decisions for monetary policy."

Hammack also said the Fed should wait to see the impact of Trump's policy shifts.

"With tariffs, for example, it is appropriate for policy to be patient while assessing their ultimate impact," Hammack said.

Trump signed an executive order Monday imposing a 25% tariff on allsteelandaluminumimported into the United States. He also said he plans to impose reciprocal tariffs on U.S. trading partners this week.

After talks with Mexican and Canadian leaders last week, the presidentsuspended until March 4the 25% tariffs on goods imported from both countries. The same day, the Chinese government announced retaliatory tariffs on U.S. imports in response to Trump's announced 10% tariff on Chinese imports.

Powell said monetary policy is "well positioned" to handlefuture risks。

"If the economy remains strong and inflation does not sustainably move toward 2%, we can maintain policy restraint for longer," Powell said. "If the labor market unexpectedly weakens, or inflation declines faster than expected, we can ease policy accordingly."