At the conclusion of the Federal Reserve’s two highest-level meetings in January, Federal Reserve Chair Jerome Powell signaled that there is no rush to cut rates and more hikes could be on the horizon.
In a press conference following the policy statement, Powell backed an “ongoing” gradual tightening of monetary policy. He also cautioned against premature talk of cutting rates, suggesting that further rate hikes could happen sometime in the near future.
Powell’s remarks point to a hawkish US central bank that’s unlikely to cut rates anytime soon. Instead, the central bank is likely to stick with its gradual approach to tightening policy, as evidenced by the series of hikes that began in December 2015.
Policymakers have expressed concern about the economy overheating, which is why the Fed has been so cautious in its approach to tightening. The Federal Reserve believes that if it takes a slower approach to tightening, it can ward off inflationary pressures while still delivering healthy economic output.
Powell’s comments also serve to emphasize the Fed’s independence from the White House. Though President Trump has frequently criticized the Fed’s increase in rates, the central bank has continued hiking rates in spite of Trump’s calls to halt rate hikes.
Powell’s assessment that the economic outlook is positive but there is room to go, suggests the central bank is likely to continue its cautious tightening policy throughout 2019. With the current rate at 1.50-1.75 percent, further increases are anticipated as the Fed balances the need to keep inflation in check while also ensuring the economy maintains its healthy growth.