2024-09-30 18:22:09
(Washington) The Chairman of the US Federal Reserve (Fed), Jerome Powell, indicated on Monday that further interest rate cuts were in the works, although their magnitude and the speed at which they are deployed will depend on developments of the economy.
Investors and Wall Street economists are wondering whether the Fed will continue its sharper-than-usual half-percentage-point cut earlier this month with another deep reduction in of one of its next meetings, in November or December. At their September 18 meeting, Fed officials hinted at two more quarter-point rate cuts at these final meetings in 2024.
In remarks to the National Association for Business Economics in Nashville, Tenn., Powell said the U.S. economy and hiring were largely healthy and noted that the Fed was “recalibrating” its interest rate. director, which is now at around 4.8%.
He also said the rate was moving “toward a more neutral position,” a level that neither stimulates nor restrains the economy. Fed officials set the “neutral rate” at around 3%, well below its current level.
Mr. Powell emphasized that the Fed’s current goal is to support a largely healthy economy and job market, rather than saving an ailing economy or preventing a recession.
“Overall, the economy is in good health,” Mr. Powell said in written remarks. We intend to use our tools to keep her in this position. »
Inflation, by the Fed’s preferred measure, fell to just 2.2% in August, the government reported Friday. Core inflation, which excludes the volatile food and energy categories and generally provides a better read on underlying price trends, accelerated slightly, to 2.7%.
The unemployment rate, meanwhile, fell slightly last month, to 4.2%, from 4.3%, but still remains nearly a percentage point above the year’s low of 3.4%. last, the lowest level in 50 years. Hiring has slowed to an average of just 116,000 jobs per month over the past three months, about half its pace a year ago.
Mr. Powell said the labor market was strong, but “cooling,” and added that the Fed’s goal was to keep unemployment from rising much further.
Over time, the Fed’s rate cuts are expected to reduce borrowing costs for consumers and businesses, including lower rates for mortgages, auto loans and credit cards.
“Our decision […] reflects our growing confidence that with an appropriate recalibration of our policy, labor market strength can be maintained against a backdrop of moderate economic growth and inflation falling sustainably to 2%,” Powell said.
One of the main reasons the Fed is cutting its benchmark rate is because hiring has slowed and unemployment has risen, which threatens to slow the economy as a whole. The Fed is required by law to seek both stable prices and full employment, and Mr. Powell and other policymakers have emphasized that they are now focusing on the twin prongs of employment and inflation , after focusing almost exclusively on combating rising prices for almost three years.
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