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Powell Suggests Interest Rates Could Stay High for a Longer Period

The Federal Reserve is likely to wait longer than initially expected to cut interest rates, given stubborn inflation readings in recent months, the central bank’s top two officials said Tuesday.

Policymakers came into 2024 looking for evidence that inflation was continuing to cool rapidly, as it did late last year. Instead, progress on inflation has stalled or even reversed by some measures.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Jerome H. Powell, the Fed chair, said at an event in Washington on Tuesday.

In a separate speech on Tuesday, Philip N. Jefferson, the Fed’s vice chair, also said the central bank should be prepared to delay rate cuts if inflation remains hot. “While we have seen considerable progress in lowering inflation,” Mr. Jefferson said in a speech at a Fed research conference in Washington, “the job of sustainably restoring 2 percent inflation is not yet done.”

Fed officials in December indicated that they expected to cut rates three times by the end of 2024, and they held to that forecast last month despite hotter-than-expected inflation readings to start the year. Mr. Powell and Mr. Jefferson did not back away from that forecast on Tuesday, but they also did not reiterate it.

Investors have closely watched Fed officials in recent weeks for any hint of changing views on when rate cuts might begin. When the year began, Wall Street analysts expected officials to begin cutting rates in quarter-point increments as early as this spring. That’s because annual inflation had been falling steadily from a high of about 9 percent to about 3 percent, closing in on the Fed’s target.

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