US rate cuts ‘can and will’ start this year if trends continue: Fed chair

Powell said if current trends continue, the Fed “can and will” start cutting interest rates this year – Copyright AFP Mandel NGAN

The US Federal Reserve “can and will” begin cutting interest rates this year if current economic trends continue, the head of the US central bank told lawmakers in Washington Thursday. 

“What we’re seeing is continued strong growth, strong labor market and continuing progress in bringing inflation down,” Fed chair Jerome Powell told the US Senate Banking Committee on the second day of hearings on Capitol Hill. 

He added that the Fed “can and will” begin cutting its key lending rate over the course of this year “if the economy evolves over that path.”

Powell’s remarks suggest the Fed still intends to begin lowering interest rates this year from the current 23-year high of between 5.25-5.50 percent, despite a recent uptick in monthly inflation. 

That small January rise caused concern in the financial markets about the path of inflation, helping to push back traders’ expectations of the start of Fed rate cuts to the summer. 

Earlier Thursday, the European Central Bank (ECB) cut its growth forecast and said it now expects inflation to decline towards its two-percent target earlier than previously thought, but kept its key interest rates unchanged.