It appears that Federal Reserve Chair Jerome Powell may not be done raising interest rates just yet. Powell recently spoke at an international banking seminar, calling talk of cutting interest rates in the near future “premature”. He said that more rate hikes could be in the Federal Reserve’s future if the U.S. economy continues on its current trajectory.
Powell stated that while the economy is “performing very well right now,” it is premature to be talking about cutting rates before the Fed’s current post-hike monetary policy posture is fully assessed. He also noted that the economy is facing numerous headwinds, and the Fed must consider these while weighing its policy decision.
Most analysts took Powell’s comments as a signal that he is disinclined to continue cutting rates, and could even push for further rate hikes. He indicated that there is some worry that the recent rate hikes may be slowing the economy, and as such the Federal Reserve must monitor economic data very carefully and be prepared to make adjustments as needed.
Powell’s comments underscore the fact that the Fed is still trying to figure out the right balance between performance and risk when it comes to economic policy. While he expressed optimism that the U.S. economy is on the right track and will continue to benefit from the combination of the tax cuts passed in 2017 and low unemployment rates, he also warned that too much rate hiking too quickly could potentially choke off economic growth. It appears that the Federal Reserve will continue to walk a precarious line between economic growth and risk going forward.