Federal Reserve Chairman Jerome Powell said in remarks on Monday that the U.S. economy appears poised for a continued slowdown in inflation, so the Fed can lower its benchmark interest rate and “over time” be able to no longer rein in activity. He said it would be possible to reach the standard. It is clear that the pace of interest rate cuts is either fast or slow.
“Disinflation is widespread, and recent data show that disinflation is widespread and “This shows further progress towards a sustained return to 2%.”
“If the economy progresses broadly as expected, policy will move toward a more neutral stance over time,” Powell said. “But we are not on a preset course. There are risks on both sides and we continue to make decisions meeting by meeting.”
In response to questions after his public remarks, Chairman Powell said he viewed the prospect of rate cuts as “a process that will unfold over time,” adding: “This is not a committee that feels like we're in a hurry to cut rates.” I added quickly. “
The Federal Reserve cut its policy rate by 0.5 percentage point at its September 17-18 meeting, lowering it from the 20-year high of 5.25-5.50% it had held for 14 months to the current 4.75%. Range from % to 5.00%.
According to economic forecasts presented at the conference, policymakers' median expectation is for interest rates to fall further to a range of 4.25% to 4.50% by the end of the year, and to a range of 3.25% to 3.50% by the end of 2025. He also predicted that policies would improve. Easing will end in 2026, with interest rates around the estimated long-term “neutral” level of 2.9%.
“If the economy performs as expected, we will see two more rate cuts this year, totaling an additional 50 (basis points),” Powell said. “We do whatever we need to do in terms of movement speed.”
Investors are divided on whether the U.S. central bank will now proceed with a series of quarter-point rate cuts, or whether it will likely be prompted to cut rates even more sharply if the job market weakens or inflation slows more than expected. .
But Powell's reference to “two-sided” risks suggests an open discussion as data accumulates, with the September U.S. jobs report to be released on Friday likely to be the same as the Fed expects in November. It is the first of two major labor market reports to be received in the run up to its release. Meeting from 6th to 7th.
The latest inflation figures show that headline inflation remains close to the Fed's target at 2.2%, while the “core” measure, which excludes food and energy costs, has been stuck around 2.6% to 2.7% for four months.
But Powell said he felt “broader economic conditions…set the stage for further disinflation.”
Powell said that while commodity prices have fallen, inflation is now “closer to its pre-pandemic pace” in the once-sluggish sector of the service industry.
The Fed president said that while progress in housing inflation was “slow”, “the rate of growth in rents charged to new tenants remains low”.
As long as this situation continues, housing service inflation will continue to decline. ”
He said the job market remains “robust” and the unemployment rate remains low at 4.2%, a level that Fed officials believe is sustainable over the long term if inflation reaches the central bank's target. He said it was nearby.
“Overall, the economy is strong, and Chairman Powell is going to use our tools to maintain inflation,'' he said, adding that the Fed will reduce inflation without a sharp increase in unemployment. He added that he had made “considerable progress”.
