Powell warns future rate cuts hinge on reliable data as officials debate next steps for US economy
Uncertainty over the next move by the US Federal Reserve is mounting, as policymakers signal that further interest rate cuts are “not a foregone conclusion,” according to Chair Jerome Powell.
The central bank’s decision to cut its benchmark interest rate by a quarter of a percentage point to a range of 3.75 percent to 4 percent was accompanied by an unusually candid acknowledgement of deep divisions within the policy-setting committee and a warning that a lack of reliable government data could slow future action.
As reported by Reuters, Powell described the current policy stance as “modestly restrictive,” and noted that the committee’s 10-2 vote reflected “strongly differing views” about the path ahead.
Some officials, including Governor Stephen Miran, pushed for a deeper cut, while others, such as Kansas City Fed President Jeffrey Schmid, preferred no cut at all.
This rare split highlights the uncertainty facing decision-makers as they balance risks to both employment and inflation.
The lack of official economic data, due to the ongoing federal government shutdown, has left the Fed “flying blind,” as described by CNBC.
Powell emphasized that policymakers are now relying on private data, in-house surveys, and informal business contacts to guide decisions.
“We’re going to collect every scrap of data we can find, evaluate it and think carefully about it. And that’s our job,” he said.
For those monitoring economic trends and their impact on retirement and benefit plans, the Fed’s cautious approach signals a period of heightened vigilance.
The committee acknowledged that “job gains have slowed this year, and the unemployment rate has edged up but remained low through August,” while inflation “has moved up since earlier in the year and remains somewhat elevated,” as per the Fed’s post-meeting statement.
Additionally, the Fed announced it will halt its balance sheet reduction program on December 1, reinvesting proceeds from maturing mortgage-backed securities into Treasury bills to maintain liquidity in financial markets, as reported by CNBC.
Powell concluded that the Fed’s goal is to “get to the end of this cycle with the labour market in a good place and with inflation on its way to 2 percent or at 2 percent.”
The central bank’s next steps will depend on the evolving economic landscape and the availability of reliable data.
