U.S. Fed Chair Jerome Powell calls rate cut speculation 'premature'

It is still "premature" to speculate on when the U.S. Federal Reserve will start cutting interest rates despite the bank's recent progress on inflation, Fed Chair Jerome Powell said Friday.

The U.S. Federal Reserve has taken aggressive action to tackle runaway inflation, and has successfully slowed the rate at which prices have been increasing this year.

Nevertheless, the Fed's decision to lift its benchmark lending rate to a 22-year high and hold it there has so far failed to bring inflation down to its long-run target of two percent.

On Friday, Powell said the Fed's rate-setting Federal Open Market Committee (FOMC) would continue its inflation battle despite the apparent success of its "restrictive" stance of monetary policy.

"It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease," he said at an event in Atlanta, Georgia.

"We are prepared to tighten policy further if it becomes appropriate to do so," he continued.

"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 added.

Futures traders assign a probability of almost 98 percent that the Fed will hold interest rates for a third straight meeting at its next rate decision on December 12-13, according to data from CME Group.

- U.S. economy 'slowing' -

Powell told the audience in Atlanta that the Fed was "very, very carefully watching as the economy appears to be slowing" in the final quarter of 2023, while noting a cooling in the hot labor market too.

The Fed is on the "path" to bringing inflation back down to two percent without an accompanying surge in unemployment, he added.

Cutting inflation while avoiding a recession -- commonly known as a "soft landing" -- is challenging to pull off, but the U.S. central bank recently suggested it could be on track to do so.

Austan Goolsbee, Powell's colleague on the rate-setting FOMC, indicated Friday that he also thought the Fed was on target to meet its dual mandate of controling both inflation and unemployment.

"The employment side is still looking really excellent, and inflation is coming down very rapidly," Chicago Fed President Goolsbee told a conference in the city.

"That's exactly what we promised and what we want to happen," he added.

But Goolsbee warned that policymakers should not become complacent about the challenges they now face.

"We should be sobered by history that every previous time you've gotten inflation down a lot it has required a recession to do so, and sometimes a very serious one," he said.

"On the optimistic side, I guess it's that -- look out the window!" he continued, adding that the Fed has brought inflation down "a lot" while maintaining a relatively low unemployment rate.