Fed can take cautious approach to rate cuts amid economic strength: Powell

Investing.com — Federal Reserve Chair Jerome Powell said the Fed can take a “little more cautious” approach in cutting rates toward neutral as the economy remains in good shape.

“We can afford to be a little more cautious as we as we try to find neutral rate,” Powell said in an interview by Andrew Ross Sorkin at New York Times (NYSE:NYT) DealBook Summit on Wednesday. 

The Fed chief pointed to a stronger-than-expected economic growth, a robust labor market and slightly higher inflation as reasons for the Fed to take a cautious approach toward finding a neutral – one that neither stimulus nor weighs on economic growth.

“The economy is stronger than we thought it was going to be in September…the labor market is is better, and inflation is coming a little higher,” Powell said in what was his final public address ahead of the Fed’s Dec. 17-18 meeting.   

The Fed kicked off its rate-cutting cycle in September with a jumbo 50-basis-point and followed that up with a 25bps at the Nov. 6-7 meeting. 

Since the meeting, however, expectations for a deep rate-cutting cycle have been cooled by data signaling underlying strength in the economy. 

Ahead of the December meeting, incoming economic data including the nonfarm payrolls report due Friday are expected to play a key role in the Fed’s rate decision process.

Despite a downside surprise in private payrolls data for November, released Wednesday, economists continue to believe the labor market remains on a solid footing.