Fed Chair Powell calls talk of cutting rates ‘premature’ and says more hikes could happen

Federal Reserve Chairman Jerome Powell on Friday pushed back on market expectations for aggressive interest rate cuts ahead, calling it too early to declare victory over inflation.

Despite a string of positive indicators recently regarding prices, the central bank leader said the Federal Open Market Committee plans on “keeping policy restrictive” until policymakers are convinced that inflation is heading solidly back to 2%.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said in prepared remarks for an audience at Spelman College in Atlanta. “We are prepared to tighten policy further if it becomes appropriate to do so.”

However, he also noted that policy is “well into restrictive territory” and noted that balance of risks between doing too much or too little on inflation are close to balanced now.

Markets moved higher following Powell’s remarks, with major averages positive on Wall Street and Treasury yields sharply lower.

“Markets view today’s comments as inching toward the dovish camp,” said Jeffrey Roach, chief economist at LPL Financial.

Expectations that the Fed is done raising rates and will move to an easing posture in 2024 have helped underpin a strong Wall Street rally that has sent the Dow Jones Industrial Average up more than 8% over the past month to a new 2023 high.

Powell’s remarks gave some credence to the idea that the Fed at least is done hiking as the string of rate hikes since March 2022 have cut into economic activity.

“Having come so far so quickly, the FOMC is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced,” he said.

“As the demand- and supply-related effects of the pandemic…