By Ovunc Kutlu
ISTANBUL (AA) - US Federal Reserve Chair Jerome Powell said Wednesday that macroeconomic data have not given Federal Open Market Committee (FOMC) members confidence this year to begin rate cuts.
"The most recent inflation readings have been more favorable than earlier in the year, however, there has been modest progress toward our inflation objective," Powell said at a news conference after the Fed's two-day meeting concluded.
"We need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%," he added.
Powell said inflation data from earlier this year were higher than expected, although more recent monthly readings have "eased somewhat."
"Inflation has eased substantially from a peak of 7% to 2.7%, but it is still too high," he said. "We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply, and reduce inflationary pressures."
The Fed chair said the labor market has come into a better balance with continued strong job gains and a low unemployment rate.
"As labor market tightness has eased and inflation has declined over the past year, the risks of reaching unemployment and inflation goals have moved towards better balance," he said. "Our economy has made considerable progress towards both goals of maintaining maximum employment and stable prices."
He said economic activity continued to expand at a solid pace, although GDP growth moderated from 3.4% in the fourth quarter last year to 1.3% in the first quarter this year.
Powell noted that the economic outlook remains uncertain, while FOMC members remain highly attentive to inflation risks.
"We know reducing policy rate too soon, or too much, could result in a reversal of the progress we have seen on inflation. At the same time, reducing policy rate too late or too little could unduly weaken economic activity and employment," he said.
"If the economy remains solid and inflation persists, we are prepared to maintain the current target range for the federal funds rate as long as appropriate," he added.
The comments came after the Fed kept its federal funds rate unchanged between the 5.25% - 5.5% target range, as widely expected, which is the highest in 23 years.
The central bank, however, signaled it expects one interest rate cut this year, according to its projection materials that were released earlier.