Inflation in the United States is moving in the right direction but future rate cuts will not bring them back to their pre-pandemic levels, the president of the American Federal Reserve (Fed) said on Friday.
Inflation in February is down, not as much as it was in the second half of last year, but it’s clearly in the direction we want to see, Jerome Powell said at a conference in California. .
The Fed continues to take economic data into account before considering a rate cut, which will necessarily occur, added the head of the American central bank. I do not think that rates will return to the historically low level that they were before the pandemic, he nevertheless clarified.
It is difficult to determine where they should be located. We don’t know where rates will be once this is all behind us, he continued, but they are going to stay higher than their pre-pandemic levels for a while and we have to get used to that.
Interest rates, both in the United States and within the Eurozone, reached particularly low levels after the 2008 financial crisis and remained there for several years, even becoming negative at the height of the pandemic.
When rates are negative, it is the banks which remunerate the central bank for the deposits they make there.
The president of the Fed nevertheless still refused to consider a date for the first rate cut.
Our monetary policy places us where we want to be to face different scenarios, Jerome Powell clarified, we want to be able to react if inflation weakens, if the economy slows down and we can.
We want to use our tools to guarantee the solidity of the economy and the labor market while making progress on inflation, this is our approach. And we have the possibility of achieving it, which would be a great thing for the American people, assured Mr. Powell.
The PCE inflation index rebounded slightly year-on-year in the United States in February, 2.5%, but slowed down compared to January, 0.3%, while the rise in oil prices Energy was the main cause of this rebound.
The PCE index is the inflation measure favored by the Fed, which wants to bring it down to 2%, a goal it plans to achieve in 2026.