Jerome H. Powell, the chair of the Federal Reserve, said that the central bank could be “more cautious” as it cuts interest rates at a moment when the economy was growing strongly and price increases had been slightly sticky.
“Growth is definitely stronger than we thought, and inflation is coming a little higher,” Mr. Powell said at The New York Times’s DealBook Conference on Wednesday. “The good news is that we can afford to be a little more cautious as we try to find neutral.”
Mr. Powell did not comment directly on whether the Fed would cut rates at the central bank’s upcoming Dec. 17-18 meeting. But the Fed chair’s comments underscore the complicated moment facing the Fed.
The American economy has been growing at a surprisingly strong pace in recent months, fueled by consumers who are now spending robustly heading into the holiday season. The job market has slowed without grinding to a halt, wage growth remains solid, and productivity has been showing signs of meaningful improvement.
That combination is great news for policymakers and everyday workers alike — it means that America has managed to avert a painful recession that was once seen as all but guaranteed as the Fed lifted interest rates sharply in 2022 and 2023 to wrestle inflation under control.
But the economy’s resilience also makes the Fed’s next steps trickier.
The central bank began to cut interest rates in September in response to steadily cooling inflation, and its officials forecast that they would continue to lower them both this year and into 2025. But at the time, unemployment was ticking up and the economy seemed to be cooling.
Now, those trends have reversed: Unemployment has stabilized and growth is chugging along. Inflation has also been stickier than many economists had expected in recent months. And against that backdrop, officials must decide how much more to lower interest rates from their current 4.5 to 4.75 percent range.
“We’re now on a path to bring rates back down to a more neutral level over time,” Mr. Powell said on Wednesday, referring to the level at which interest rates neither stoke nor slow economic growth.
The most immediate question has been whether a rate cut in December still makes sense. Over the past month, investors have at times widely expected a quarter-point reduction at the Fed’s next meeting — and have at other moments doubted whether it will materialize. Currently, markets are betting on a cut.
Questions also linger about how much the Fed will cut interest rates in 2025. That’s especially true because Donald J. Trump, the president elect, has pledged to ratchet up tariffs — which could feed into consumer prices and keep inflation elevated.
Mr. Powell said that it was too early for the Fed to do anything but model potential tariffs, since it was not clear what they would look like and how other countries would react, among other uncertainties.
“We can’t really start making policy on that at this time,” he reiterated. “We have to let this play out.”
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