Federal Reserve Chairman Jerome Powell expressed on Thursday that the robust US economic growth gives policymakers the luxury of patience in determining the pace and magnitude of interest rate cuts. “There’s no urgency to slash rates as the economy isn’t showing such signs,” Powell stated during a speech addressed to business executives in Dallas. “Our current economic strength enables us to be deliberate in our choices.”

Powell optimistically assessed the state of the domestic economy, labeling it as the best performing major economy worldwide. He pointed out the resilience of the labor market despite the less than anticipated job growth in October, which he mainly credited to weather disruptions in the Southeast and labor strikes. Payrolls outside of the agricultural sector saw a mere increase of 12,000 during that period.

While acknowledging a rise in the unemployment rate, Powell highlighted that it has stabilized in recent months and remains relatively low compared to historical records.

On the topic of inflation, Powell noted that advancements have been widespread, with Fed officials predicting a gradual return to the central bank’s 2% objective. Despite recent inflation data indicating a slight rise in both consumer and producer prices, Powell emphasized that inflation, measured by the Fed’s preferred gauge, stood at 2.3% in October, or 2.8% excluding food and energy costs.

“Inflation is inching closer to our long-term 2% target, but we’re not there yet. We are committed to achieving this goal,” Powell asserted, adding that the journey might be somewhat turbulent.

Powell’s conservative stance on interest rate cuts triggered a dip in stocks and a rise in Treasury yields. Market participants also reduced their expectations for a rate cut in December.

His comments follow a week after the Federal Open Market Committee cut the central bank’s key lending rate by 0.25%, landing it within a 4.5% to 4.75% range. This came after a 0.5% cut in September.

Powell described these steps as a fine-tuning of a monetary policy that no longer primarily aims to curb inflation but to sustain the labor market as well. Market sentiment largely anticipates further quarter-point reductions by the Fed in December and a few more in 2025.

Powell, however, refrained from providing his personal forecast. The central bank aims to steer its key rate towards a neutral level that neither promotes nor hampers growth, but the final target remains uncertain.

“We are optimistic that with the right adjustments to our policy stance, we can maintain economic and labor market strength while driving inflation down sustainably to 2%,” he stated. “We are gradually moving policy towards a more neutral setting. However, the roadmap to get there is not predetermined.”

Powell admitted that the execution of this shift towards the neutral rate would be complex. “We are trying to find the balance between moving too fast and too slow. We want to strike the right balance by supporting the labor market while also facilitating inflation reduction,” he explained. “So, if the data allows us to decelerate a bit, it seems like a wise move.”

The Fed has also been incrementally reducing its bond holdings each month, with no clear indications of when this process might conclude.