US Fed Chair Jerome Powell signals delayed interest rate cuts amid high inflation

US Federal Reserve Chairman Jerome Powell signaled delayed interest rate cuts after a series of high inflation data, saying that the policymakers would wait longer than previously anticipated to cut rates.

Powell noted that it would likely take more time for officials to gain the necessary confidence that inflation is headed toward the Fed’s 2% goal before lowering borrowing costs.

While pointing at the lack of additional progress made on inflation after the rapid decline seen at the end of last year, he said that the Fed could keep rates steady for “as long as needed” if price pressures persist.

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“The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence,” Powell said Tuesday in a panel discussion alongside Bank of Canada Governor Tiff Macklem at the Wilson Center in Washington, Bloomberg News reported.

“Given the strength of the labor market and progress on inflation so far, it is appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us,” he added. 

Powell’s remarks show officials see little urgency to cut rates and suggest that any reductions in 2024 may come relatively late in the year, if at all.

Last month, Fed policymakers indicated three interest-rate cuts in forecasts, but investors are now betting on just one to two cuts this year, futures markets show. 

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The next meeting of the rate-setting panel Federal Open Market Committee (FOMC) is scheduled on April 30 - May 1.

Meanwhile, US Treasury yields hit fresh year-to-date (YTD) highs after the hawkish comments from Powell. The yield on the two-year note briefly exceeded 5% and reached the highest level since November.

The US economic data remained strong amid robust job additions and higher-than-expected retail sales, fading hopes of early rate cuts.

(With inputs from Bloomberg News)