November 13, 2023 — Powell Remains Cautious About Inflation Going into 2024


A week after the Federal Reserve’s meeting, Chair Jerome Powell spoke to the International Monetary Fund. Powell said he and his colleagues at the Fed are pleased to see inflation slowing, but they remain unsure if they have done enough.

Powell said inflation is “well above” where the Fed would like it to be and described their policy as “significantly restrictive”. The Fed is waiting to see if rates should go higher and how long they need to stay elevated before it is safe to start a rollback.  The Fed’s preferred inflation measure, the PCE, has fallen to an annual rate of 3.7 percent from 5.3 percent at its peak in February 2022. The CPI peaked above 9 percent in June 2022.

Powell’s words are a warning to those who are expecting rate cuts in 2024, rates may still edge up if inflation starts to accelerate again.  The Fed is being careful not to optimistically interpret a few months of data, yet do not want to overtighten.

Now, there is a less than 10 percent probability the FOMC will raise rates again at the final meeting of the year on December 12-13. Traders are expecting rate cuts to start in June of next year.