Powell tells US Congress Fed still in no rush to lower interest rates, well positioned for risks

WASHINGTON – Federal Reserve chairman Jerome Powell said the US central bank does not need to rush to adjust interest rates, again signalling that officials will be patient before lowering borrowing costs further.

“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Mr Powell told the Senate Banking Committee on Feb 11.

“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” he said. “At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”

Mr Powell’s comments largely echoed remarks he gave in January after Fed policymakers left the US central bank’s key policy rate unchanged.

Treasury yields moved to their highs of the day as Mr Powell spoke, while stocks pushed higher. Investors also largely left unchanged their expectations for rate cuts in 2025, with a cut not fully priced until September and fewer than two cuts priced in for all 2025.

That decision came after the US Federal Open Market Committee lowered interest rates at each of its last three meetings in 2024. Mr Powell and other Fed officials have signalled they are likely to hold rates steady until they see more progress on lowering inflation, and as they await further details on US President Donald Trump’s economic-policy plans.

Mr Trump’s policy proposals, meanwhile, have added a layer of uncertainty to the economic outlook. The Trump administration has ramped up tariffs on goods from China, and on all imports of steel and aluminium, threatened additional duties on Canada and Mexico, and launched a promised immigration crackdown. 

Those measures could put upward pressure on inflation, weigh on economic growth or constrict the number of available workers, all of which would likely have policy implications for the Fed. Some Fed officials have begun to factor Mr Trump’s policies into their forecasts for how the economy will evolve, while others have said they have not yet seen enough details on the plans to do so.

“We are attentive to the risks to both sides of our dual mandate, and policy is well positioned to deal with the risks and uncertainties that we face,” Mr Powell said.

Lawmakers also probed Mr Powell on financial regulation, as Mr Trump advances a deregulatory push across the federal government. That push has already played a role in the coming resignation of Fed governor Michael Barr from being vice-chairman for supervision. Though he will stay on as a governor, Mr Barr has said he will step down from the regulatory post at the end of February, in part to avoid a clash with the new administration.

Mr Powell said he is hopeful a version of a long-awaited bank-capital plan could be reached “fairly quickly”, and would be in line with other large jurisdictions and consistent with international accords. “We remain committed to completing Basel III Endgame. We think it’s good for US banks, it’s good for our economy that there be a global standard beneath which foreign banks can’t fall,” said Mr Powell.

Lawmakers repeatedly pressed Mr Powell about the impact of a diminished Consumer Financial Protection Bureau (CFPB). Democratic Senator Elizabeth Warren of Massachusetts asked him who is responsible for examining giant banks to make sure they are not cheating consumers in the absence of the consumer watchdog agency.

“No other federal regulator,” Mr Powell responded.

The questions come after billionaire Elon Musk, who is acting as an adviser to the Trump White House, helped to effectively shut down the CFPB in February.

Mr Powell also told lawmakers the US central bank makes no decisions related to outgoing government payments.

“We make no judgments whatsoever. Those are all made upstream from us,” Mr Powell said, adding that the Fed acts as the Treasury Department’s fiscal agent, processing federal payments on its behalf.

Asked whether the system is safe, Mr Powell said: “I believe it is.”

Mr Powell’s comments come as the Treasury has landed in the spotlight in recent weeks after members of Mr Musk’s government efficiency team were given access to government payment systems at the department. Mr Powell said he did not believe members of the so-called Department of Government Efficiency, or Doge, had tried to access the Fed’s systems.

Mr Powell is set to appear before the House Financial Services Committee on Feb 12. BLOOMBERG