In a commitment to curb inflation, Federal Reserve Chair Jerome Powell expressed no urgency to reduce interest rates anytime soon. Addressing the Senate Banking Committee, Powell depicted an economy characterized by robustness, underpinned by a solid labor market. Even though inflation shows signs of easing, it remains above the Federal Reserve’s ideal target of 2%.
Powell’s testimony, part of a two-day appearance on Capitol Hill, resumed on Wednesday with the House Financial Services Committee. Investors and market watchers have deduced from Federal Reserve communications that interest rates are likely to remain stable at least until the summer. This anticipation follows a significant rate reduction in late 2024 by a full percentage point.
The central bank’s current stance, maintaining the benchmark fed funds rate between 4.25% and 4.5%, offers sufficient room for maneuver, Powell elaborated. This policy was reaffirmed during the Federal Open Market Committee’s late-January gathering.
Mortgage rates continue to hover at elevated levels despite prior reductions by the Fed. Powell clarified that these rates are more closely tied to long-term bond rates, like the 10-year and 30-year Treasury yields, rather than the Fed’s immediate policy actions. As the Fed keeps its rates low, there might be a potential decrease in mortgage rates, though the timeline for such a change remains uncertain.
