Powell says Fed will likely cut rates cautiously given persistent inflation pressures

Chairman Jerome Powell says the Federal Reserve will likely cut its key interest rate slowly and deliberately in coming months, in part because inflation is showing signs of persistence and Fed officials want to see where inflation is headed.

WASHINGTON — Chairman Jerome Powell said Thursday that the Federal Reserve will likely cut its key interest rate slowly and deliberately in coming months, in part because inflation is showing signs of persistence and Fed officials want to see where inflation is headed.

Powell said in prepared remarks for a speech in Dallas that inflation is getting closer to the Fed’s 2% target, “but it’s not there yet.”

At the same time, he said, the economy is strong and Fed policymakers can take time to monitor the path of inflation.

“The economy is not signaling that we need to rush to cut rates,” the Fed chairman said. “The strength we see in the economy right now gives us the opportunity to approach our decisions carefully.”

Economists expect the Fed to announce another quarter-point rate cut in December, following a quarter-point cut last week and a half-point cut in September.

But the steps the Fed takes next are much less clear. In September, central bank officials jointly announced their intention to cut their key interest rates four times by 2025. However, Wall Street traders now expect just two rate cuts from the Fed, according to futures prices tracked by CME FedWatch.

Donald Trump’s victory in the presidential election has caused government bond yields to rise. It’s a sign that investors expect faster growth next year, as well as potentially bigger budget deficits and even higher inflation if Trump were to impose widespread tariffs and mass deportations of migrants as he has promised.

In his remarks Thursday, Powell suggested as much inflation In the coming months, interest rates may remain slightly above the Fed’s target. But he reiterated that inflation should eventually fall further, “albeit on a sometimes bumpy path.”