Powell Brushes Off Rate-Cut Bets as Fed Moves Carefully

Federal Reserve Chair Jerome Powell pushed back against Wall Street’s growing expectations of interest-rate cuts in the first half of 2024, saying the committee will move cautiously with borrowing costs at a 22-year high but retain the option to hike further.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said Friday in Atlanta. “We are prepared to tighten policy further if it becomes appropriate to do so.”

Powell signaled that Fed officials expect to leave interest rates steady when they meet Dec. 12-13, giving themselves more time to evaluate the economy after raising rates aggressively from near zero in March 2022 to above 5% in July. A slowing US economy and fall in the inflation rate have raised expectations among investors that the central bank could begin to cut rates as soon as March.

“Having come so far so quickly, the FOMC is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced,” Powell said at Spelman College, a historically Black school in Atlanta.

Markets took Powell’s brush-off in stride, boosting odds of a quarter-point cut by the Federal Open Market Committee’s March meeting well above 50%, and fully pricing in a cut in May. Traders see more than a full point of cuts by December 2024.

Conversely, Fed officials projected rates at 5%-5.25% at the end of next year, according to their median forecast released in September — just one-quarter point lower than the current level.

Treasury yields and the dollar fell and the S&P 500 rose, as investors focused on remarks suggesting that Powell was more dovish than he previously was, including his remark that policy is now “well into restrictive territory.”