In a statement following the Federal Reserve’s decision to hold interest rates, Fed Chair Jerome Powell said the central bank does not have to be in a hurry to adjust its policy stance, considering that policy is now less restrictive than it had been and the economy remains strong.
After cutting the benchmark interest rate by a full percentage point last year, the Fed kept it in the current 4.25-4.50 percent range.
“In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings,” he stated.
Trump criticizes Fed’s move
In a post on Truth Social, U.S. President Donald Trump said “the Fed failed to stop the problem they created with inflation.”
In response to the Fed’s policy decision and Powell’s comments, Trump said he would reduce inflation by unleashing American energy production, slashing regulation, rebalancing international trade and reigniting American manufacturing.
“The Fed has done a terrible job on Bank Regulation. Treasury is going to lead the effort to cut unnecessary Regulation and will unleash lending for all American people and businesses,” he added.
Last Thursday, Trump told global business leaders he would call on the Federal Reserve to cut interest rates. “I’ll demand that interest rates drop immediately, and likewise they should be dropping all over the world,” he said at the World Economic Forum Annual Meeting in Switzerland.
When asked about Trump’s demands, Powell said “It’s not appropriate” to comment on what the president says. However, he added that “the public should be confident that we will continue to do our work as we always have focusing on using our tools to achieve our goals and really keeping our heads down.”
U.S. GDP rises above 2 percent
In his statement, Powell noted that recent indicators suggest that economic activity has continued to expand at a solid pace. “For 2024 as a whole, GDP looks to have risen above 2 percent, bolstered by resilient consumer spending,” he stated. Meanwhile, investment in equipment and intangibles appears to have slowed in the fourth quarter but was strong for the year overall. Following weakness in the middle of last year, activity in the housing sector seems to have stabilized.
Commenting on the labor market, Powell noted that conditions remain solid. Payroll job gains averaged 170 thousand per month over the past three months. Following earlier increases, the unemployment rate has stabilized since the middle of last year, and at 4.1 percent in December, remains low. In addition, nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed.
“Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance. The labor market is not a source of significant inflationary pressures,” he added.
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Inflation remains elevated
On Inflation, Powell added that it has eased significantly over the past two years but remains somewhat elevated “relative to our 2 percent longer-run goal.”
Estimates based on the Consumer Price Index and other data indicate that total PCE prices rose 2.6 percent over the 12 months ending in December. Excluding the volatile food and energy categories, core PCE prices rose 2.8 percent.
“Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets,” the Fed Chair added.
