Federal Reserve chairman Jerome Powell stated on Thursday that considering the strong state of the US economic, it is prudent to take a more patient approach when determining future interest rates and their timing.
Powell said in a Dallas speech that the current economy does not indicate an urgent need for rates to be reduced.
The strength of the US Economy allows us to take thoughtful, deliberate decisions.
Powell painted a picture of optimism, highlighting that the US is doing better than other major economies around the world.
The job market remains strong, despite the fact that October’s job growth was below expectations. This is mainly because of storm disruptions and strikes in the Southeast. Nonfarm Payrolls showed modest growth of 12,000 in the latest figures.
The President noted that, although the unemployment rate has been rising in recent years, it is still very low when compared with historical norms.
Powell said that the Fed expects inflation to gradually approach 2%.
Despite recent data showing a small increase in both consumer and producer price, the Fed preferred inflation measure suggests that October’s rate was 2.3%, or 2.8% if food and energy prices are excluded.
We haven’t reached our long-term 2% inflation goal yet, although the trend is closer. Powell said that he was committed to reaching this goal, even though the road may be uneven at times.
The Federal Open Market Committee (FOMC), which lowered the benchmark rate of interest by 25 basis point, has made these comments shortly after. It now sits in the range between 4.5% and 4.75%. The move was a follow-up to a reduction of 50 basis points in September.
Powell said that these changes in rates were part of a wider shift in the monetary policy. The focus has shifted from controlling inflation to supporting stability on the job market.
Analysts expect another quarter-point reduction in December and further adjustment in 2025.
Powell, despite these expectations about rate trajectory, refrained from giving concrete predictions.
The Fed’s goal is to achieve a level of neutral rates that does not stimulate or restrain growth. However, the precise endpoint still remains unknown.
Powell stated that “with appropriate policy recalibrations we are confident in the ability of our economy to remain strong and stable, as well as the labor market, whilst inflation continues its downward trend toward our target of 2%.”
There is no roadmap predetermined for the process. We are moving our policy towards a neutral position.
The Fed also allows the proceeds of its large bond holdings to roll off each month.
Powell didn’t indicate a date when the practice would end.
The post Fed Chair Powell: Current economy does not show urgency for rate reductions may be updated as new information unfolds
This site is for entertainment only. Click here to read more
