Jerome H. Powell, the chair of the Federal Reserve, stated on Friday that resilient financial development is giving the central financial institution the flexibleness to be affected person earlier than reducing rates of interest.

Fed officers raised rates of interest sharply from early 2022 to mid-2023, they usually have left them at about 5.3 % since final July. That comparatively excessive degree primarily faucets the brakes on the financial system, partially by making it costly to borrow to purchase a home or begin a enterprise. The aim is to maintain charges excessive sufficient, for lengthy sufficient, to wrestle inflation again below management.

However worth will increase have cooled notably in latest months — inflation ran at 2.5 % in February, a report on Friday confirmed, far under its 7.1 % peak in 2022 for that gauge and simply barely above the Fed’s 2 % aim. On condition that slowdown, officers have been contemplating when and the way a lot they’ll minimize rates of interest this 12 months.

Whereas traders have been initially hopeful that fee cuts would come early within the 12 months and be substantial, Fed officers have just lately struck a cautious tone, sustaining that they need better confidence that inflation was below management. Mr. Powell reiterated that message on Friday.

“We are able to, and we can be, cautious about this choice — as a result of we could be,” Mr. Powell stated, talking in a question-and-answer session with the “Market” host Kai Ryssdal in San Francisco. “The financial system is robust: We see very robust development.”

Friday’s Private Consumption Expenditures report confirmed that buyers are nonetheless spending at a speedy clip. Current hiring information has additionally remained strong. In all, the financial system appears to be holding up even with the Fed’s excessive rates of interest.

“That implies that we don’t should be in a rush to chop,” Mr. Powell stated. “It means we are able to wait and grow to be extra assured that, the truth is, inflation is coming all the way down to 2 % on a sustainable foundation.”

The Fed is attempting to stability two dangers: On one hand, officers don’t need to hold rates of interest too excessive for too lengthy, risking an pointless recession. On the opposite, they don’t need to minimize rates of interest too early, earlier than inflation is absolutely below management.

If excessive inflation lingers for years on finish, it might probably grow to be embedded within the financial system as folks and corporations modify their conduct, making it even more durable to stamp out in the long term.

Traders at the moment anticipate that the Fed would possibly start decreasing charges in June. Fed officers projected final week that they have been prone to make three quarter-point fee cuts earlier than the top of this 12 months.

Whereas the financial system appears robust for now, Mr. Powell steered that if the job market started to point out indicators of cracking, the Fed would possibly react.

“If we have been to see sudden weak point within the labor market,” Mr. Powell stated, “then that’s one thing we might be rigorously, and will draw a response as nicely.”

The Fed chair stated that whereas there may be at all times an opportunity of a recession, he didn’t suppose that the danger was excessive in the meanwhile.

“There’s no cause to suppose that the financial system is in a recession or is on the edge of 1,” Mr. Powell stated.

“However — humility,” he added.

And Mr. Powell repeatedly alluded to the elephant within the room because the nation barrels towards November’s presidential election: the politics of rate of interest cuts. There’s a danger that the central financial institution might be criticized for reducing borrowing prices within the run-up to the election, since doing so will help markets and the financial system and could be perceived as favoring the incumbent.

Former President Donald J. Trump, the presumptive Republican nominee, has already criticized the Fed for being political and stated that Mr. Powell was “going to do one thing to in all probability assist the Democrats.” Mr. Trump first elevated Mr. Powell to the function of Fed chair, although he has since been reappointed to the function by President Biden.

The Fed is impartial of the White Home, and its officers stress that they set coverage with an eye fixed on the financial system, not politics. Mr. Powell didn’t particularly reference Mr. Trump’s feedback, however he did reiterate the Fed’s dedication to independence on Friday.

“Integrity is every part,” Mr. Powell stated. “We’re working to serve all People, not any explicit set of People or political events or leaders.”