The Federal Reserve is sending a signal.
On Wednesday, Federal Reserve Chairman Jerome Powell delivered a much awaited speech in which he sent a warning that talk of cutting interest rates may be premature. Powell noted that the Fed is still in a “waiting-and-seeing mode” and that further rate hikes could still be on the horizon.
Powell explained that although recent economic data has been encouraging, the Fed is still monitoring conditions and will take additional action if necessary. He noted that the central bank is being careful not to overreact as the economy continues to make strides towards a steady recovery.
The Federal Reserve had begun to increase interest rates in late 2016 after several years of holding them near zero. The recent rate hikes were meant to ward off the risk of inflation, but Powell made it clear that the Fed is now pausing hikes until further evaluation can be done.
At the same time, Powell asserted that the USA has “tremendous economic momentum” and that the strength of the labor market has been a major contributor to recent successes. He also stressed the importance of technological advances on productivity, noting that the USA is “well placed” to take advantage of them.
Overall, Powell’s speech seemed to indicate that the Federal Reserve is being deliberate in its approach to managing the economy. By refraining from making premature decisions, Powell made it clear that the Fed would take a measured approach and take ample amounts of information into consideration before taking any action.