Fed Chair Awaits More Inflation Cooling as Path Proves ‘Bumpy’

Jerome H. Powell, the chair of the Federal Reserve, reiterated on Wednesday that the central bank can take its time before cutting interest rates as inflation fades and economic growth holds up.

The central bank chief also used a speech set for delivery at Stanford to emphasize the Fed’s independence from politics, a relevant message at a time when election season threatens to pull Fed policy into an uncomfortable limelight.

This year is a big one for the Fed: After long months of rapid inflation, price increases are finally coming down. That means that central bankers might soon be able to lower interest rates from their highest levels in two decades. The Fed raised rates to 5.3 percent between March 2022 and mid-2023 to cool the economy and bring inflation to heel.

Figuring out when and how much to cut interest rates is tricky, though. Inflation has decelerated more slowly in recent months, and the Fed does not want to cut rates too early and fail to fully wrestle price increases under control. Investors had initially expected the Fed to lower rates early this year, but now see the first move coming in June or July as officials wait for more evidence that inflation has truly moderated.

“On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Mr. Powell said in remarks prepared for delivery. “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent.”

“Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy,” he added. He called reducing inflation a “sometimes bumpy path.”