Powell says solid economy allows Fed to consider rate cuts ‘carefully’

Federal Reserve Chair Jerome Powell said recent signs of economic health would allow the central bank to take its time in deciding how quickly to continue reducing interest rates.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in remarks prepared for delivery at a talk in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

The Fed cut interest rates at its two most recent meetings, beginning with a half-percentage-point reduction in September amid signs the labor market might be weakening. Officials lowered their benchmark rate by a quarter point, to a range between 4.5% and 4.75%, at their meeting last week.

The Fed’s next meeting is Dec. 17-18. Before Powell’s remarks, investors in interest-rate futures markets expected the central bank to lower rates by a quarter point at that meeting and then to slow down the pace of cuts after that. Prices in futures markets imply two additional quarter-point cuts in 2025, according to CME Group.

The central bank raised interest rates last year to their highest level in two decades to combat inflation and then held them at that level for more than a year to make sure price pressures wouldn’t resurface.

Inflation has declined notably since the middle of 2023, but the slowdown in price growth has been uneven at times, including in the last two months. Using the Fed’s preferred inflation gauge, prices excluding volatile food and energy items are projected to have increased 2.8% for the year ended October, while overall prices were likely up 2.3%, Powell said Thursday. The Fed targets 2% inflation over time.

Powell repeated his view Thursday that inflation was likely to continue to move lower, “albeit on a sometimes-bumpy path.” The Fed leader has signaled greater confidence in inflation returning to the Fed’s target recently because the labor market has cooled.

Still, he said officials would be “watching carefully to be sure” that inflation declines in line with policymakers’ expectations.

Write to Nick Timiraos at Nick.Timiraos@wsj.com