WASHINGTON (AP).—The chairman of the Federal Reserve, Jerome Powellhinted that they foresee further interest rate cuts, but hinted that they will be implemented at a moderate pace in order to support a still healthy US economy.
His comments, delivered at a conference of the National Association of Business Economics in Nashville, Tennesseedisappointed many investors’ hopes that the Fed would deliver another sharp half-point cut in its key rate before the end of the year.
This month, the central bank cut its rate by half a point more than usual as it puts its fight against inflation behind it and focuses on supporting the labor market.
The S&P 500 stock index initially fell 0.6% following his remarks, but then recovered and closed up about 0.4%.
“We see it as a process that will unfold over time,” Powell said during a question-and-answer session, referring to interest rate cuts by the Fed, “not something where we have to go fast. “It will depend on the data, on the speed at which we are really going.”
Economists say the jobs report will be a key data point that could alter Fed policies. If the unemployment rate rises or hiring falters, officials could consider a sharper rate cut later this year.
At their last meeting, on Sept. 18, Federal Reserve officials cut the interest rate from 5.3% — its highest level in two decades — to 4.8%, and anticipated two more quarter-point cuts in November and December. Powell said Monday that’s probably what will happen.
“If the economy behaves as expected, that would mean two more cuts this year,” both of a quarter point, he announced.
In prepared remarks, Powell said the U.S. economy and hiring are largely healthy, and stressed that the Fed is “recalibrating” its key interest rate, rather than cutting it quickly, which it would do in an emergency. .
He also said that the rate is heading “towards a more neutral stance,” a level that neither stimulates nor slows down the economy. Those responsible for the central bank have set the so-called “neutral rate” at around 3%, well below its current level.
Powell said the Fed’s goal is to support a healthy economy and labor market, rather than rescuing a troubled economy or preventing a recession.
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