After nearly two years of aggressively raising interest rates to fight back out-of-control inflation, the leader of the Federal Reserve Bank says 2024 looks like it could be a year of reversal.
On Sunday, Fed Chair Jerome Powell said the central bank is on track to slash interest rates three times in 2024, with the first cut possibly coming in May.
“I do think the economy is in a good place, and there’s every reason to think it can get better,” he said during an interview for “60 Minutes” on CBS News.
At its last meeting at the end of January, the central bank kept interest rates unchanged. The benchmark rate remains at 5.4%, which is the highest it’s been in 22 years.
And while Powell didn’t provide any concrete information about looming rate cuts at the press conference held after that meeting, Fed officials did say in December that they anticipated cutting the rate three times in 2024, down to 4.6% by the end of the year.
Powell confirmed that Fed officials’ thinking likely hasn’t changed from those December remarks, but he added that the next meeting in March would likely be too soon to expect a rate decrease.
The labor market was running hot again last month as U.S. employers added 353,000 jobs. At the same time, the Federal Reserve indicated it’s too soon to start lowering interest rates. @IAmAmnaNawaz discussed more with Austin Goolsbee. https://t.co/wBCDY4bh5K
— PBS NewsHour (@NewsHour) February 3, 2024
The chair said all 19 members of the policy-setting committee agreed that it would be appropriate to cut the key rate starting this year. Doing so would help businesses and consumers tremendously, as it affects borrowing costs for everything from credit cards to auto loans and even mortgages.
The Fed began its aggressive interest rate hike in March 2022 to fight inflation and has raised the rate 11 times in that period.
Yet, inflation has cooled considerably in recent months. In December, inflation sat at 2.6% year-over-year, not too far off the Fed’s goal of 2%. In the last six months of 2023, inflation was at that 2% rate, based on an annual pace.
That represents a dramatic drop from its peak during summer 2022, when inflation reached 7.1%.
Powell admitted during the “60 Minutes” interview that part of the reason why inflation increased so substantially was that the Fed misjudged how long inflation would last — and how significant it would get — following the height of the COVID-19 pandemic.
