Federal Reserve Chairman Jerome Powell (Image credit: IANS)
Chairman of the Federal Reserve Jerome Powell signaled a possible shift in monetary policy as US Economy The Fed is showing signs of stabilizing. Speaking at the Fed’s annual economic conference in Jackson Hole, Wyoming, Powell indicated that the central bank could soon begin cutting its key interest rate, which is currently at its highest level in 23 years.
Powell did not specify when the rate cuts would begin or the magnitude of these reductions. However, with inflation appearing to be under control and the labor market weakening, the Fed is widely expected to announce a modest quarter-point cut when it meets in mid-September.
“The time has come to tighten monetary policy. The direction ahead is clear, and the timing and pace of rate cuts will depend on emerging data, the evolving outlook, and the balance of risks,” Powell said in his opening remarks.
Powell stressed that rate cuts would aim to sustain economic growth and support job creation, which has slowed recently. He noted that the ongoing economic expansion could benefit Vice President Kamala Harris’ presidential campaign, despite widespread discontent with the current administration’s economic record, largely due to persistently high prices compared with pre-pandemic levels.
He Fed Chairman attributed recent economic improvements to the resolution of pandemic-related disruptions to supply chains and labor markets, along with a reduction in job vacancies, which has moderated wage growth.
Powell added: “The labor market appears unlikely to be a source of elevated inflationary pressures in the near future. We neither seek nor welcome a further cooling of labor market conditions.”
Powell’s comments come as the Fed aims for a “soft landing,” a scenario in which its series of rate hikes in 2022 and 2023 would successfully curb inflation without triggering a recession. Inflation, as measured by the Fed’s preferred gauge, fell to 2.5% in July from a peak of 7.1% two years earlier.
Responding to concerns, Powell noted that while inflation risks have diminished, risks to employment have increased. He assured that the Fed will continue to support a strong labor market while striving for price stability.
(With contributions from agencies)
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.