Federal Reserve Chairman Jerome Powell said the economy has made considerable progress towards that objective, which is good news, but the path forward remains uncertain.
Powell said a significant weakening in economic data, particularly in the labor market could be the trigger for the Fed to start cutting interest rates again, though he pointed out that policymakers see "nothing in the data pointing at that, but those are the things that we'll be looking at in the coming meetings."
The Federal Open Market Committee kept interest rates unchanged Wednesday, while sticking with the previous projections for about three 25 basis point cuts by December.
If the economy evolves as projected, "the median participant projects that the appropriate level of the federal funds rate will be 4.6% at the end of this year, 3.9% at the end of 2025 and 3.1% at the end of 2026, he said, citing the so-called dot plot the shows the median projections for the trajectory in the key interest rate -- still above the median longer-term funds rate.
Source: US Federal Reserve
Powell said recent data showing stronger-than-expected inflation in January and February haven't doused hopes that they could meet their target.
"I think they haven't really changed the over-all story which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%," he told reporters during the press conference. "We didn't take too much signal out of that. What you heard us saying was we needed to see more. We need to be careful about that decision and we're not going to over-react as well to these two months of data. We're not going to ignore them."
"The Feds monetary policy are guided by maximum employment and stable prices for the American people," Powell said in a press conference after the FOMC released its decision to keep the key interest rates unchanged. "My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those who struggle to meet the high-cost essentials like food, gas and utilities."
Powell also signaled that the Fed's rate decisions aren't influenced by politics. Asked about the letter from lawmakers that high rates are hurting the working people, he said, "At the end of the day, we take that, but we have to make our judgments and we have to stick with maximum employment, price stability, supervisor and regulate the banks, work on payment systems. Things that we do."
