Chair of the Federal Reserve Jerome Powell said Monday that while the U.S. central bank will likely continue cutting interest rates, it won’t rush the process.
Speaking at the National Association for Business Economics conference, Powell explained that recent economic data has bolstered confidence in strong economic growth and consumer spending.
“This is not a committee that feels like it's in a hurry to cut rates quickly,” Powell stated. He pointed out that despite the Fed’s decision to reduce borrowing costs by half a percentage point at its Sept. 17-18 meeting, additional quarter-point cuts are being considered by the end of the year.
Powell emphasized that the U.S. economy remains in “solid shape,” which gives the Fed hope that inflation will keep declining, helping maintain low unemployment.
He indicated that if the economy performs as anticipated, two more rate cuts could be expected by the end of the year, referencing revisions to his economic outlook released earlier in the month.
His optimism was further supported by revised data showing an increase in gross domestic income, reducing downside risks to the economy. Powell highlighted healthy consumer spending levels and an improvement in savings.
Financial markets responded positively to Powell’s comments, with both the Dow and S&P 500 rising slightly to record highs. However, U.S. Treasury yields increased, reflecting growing expectations for the Fed’s future policy moves.
Regarding economic risks, Powell mentioned “two-pronged” challenges, emphasizing that the Fed will base its decisions on incoming data. Market attention is now focused on the October employment reports, which could significantly impact future Fed actions.
Powell noted that the current Fed interest rate range is 4.75%-5.00%, and it is expected to drop to 4.25%-4.50% by year’s end. However, he emphasized that the Fed will remain flexible, adjusting to changes in the economic outlook and inflation trends.
He also mentioned that disinflation has been broad-based and expressed optimism for a sustainable return to the 2% inflation target. Meanwhile, he observed that housing inflation is easing, although rent growth remains slow.
Lastly, Powell reiterated the Fed’s commitment to using its tools to stabilize the economy, aiming for significant progress in reducing inflation without triggering a sharp rise in unemployment.
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