Federal Reserve Chairman Jerome Powell said last Wednesday, December 4, that the strengthening of the United States economy means that the central bank of this country can demonstrate some restraint in the context of actions to cut interest rates.
The head of the Fed noted that the US economic system is currently in very good shape. He also separately underlined that there is no reason for the mentioned state of affairs not to continue. According to him, the good news is that the Fed can afford to be a little more cautious in the context of decisions regarding the dynamic of borrowing costs.
It is worth noting that Jerome Powell’s comments were made against the background of widespread expectations that in the current month, the central bank of the United States will decide for the third time since the beginning of 2024 on cutting interest rates. The US financial regulator began easing its monetary policy in September. The movement in the corresponding direction began against the background of weakening inflation. Also in this case, the factor impacting the decision of the central bank of the United States was that the situation in the labor market started to cool off. In November, the US financial regulator cut interest rates again.
It is worth noting separately that, despite the Fed’s actions, borrowed money in the US has not become much cheaper, because interest rates on the vast majority of loans, including mortgages and credit cards, track the yield on the 10-year United States Treasury note. The mentioned yield reached its highest level since the summer last month.
Over the past two years, the central bank of the United States has made significant progress in combating inflation. As of the end of October, the corresponding figure was fixed at 2.6%. At the same time, in June 2022, inflation in the United States was 9.1%. However, many economists currently fear that the implementation of some of the intentions of Donald Trump, who won the US presidential election last month and will return to the White House in January, may provoke a significant acceleration in price growth. In the relevant context, Mr. Trump’s plans related to increasing tariffs on imported goods and tightening migration policy are implied.
Jerome Powell stated that there is still too much unknown for the Fed to think about the consequences of stiff tariffs.
