by Howard Schneider and Ann Saphir
JACKSON HOLE, Wyoming (Reuters) – Federal Reserve Chairman Jerome Powell said on Friday that now is the time for the U.S. central bank to cut interest rates, citing growing risks to the jobs market and with inflation on track to hit its 2 percent target.
“The risks to inflation have diminished. And the risks to employment have increased,” Jerome Powell said at the annual economic symposium in Jackson Hole, Wyoming.
“The time has come for monetary policy to adjust. The direction to take is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
At their meeting on September 17-18, Fed officials will present updated economic projections that will provide more clues about the direction of the benchmark policy rate.
Jerome Powell said he had increased confidence that inflation would be “on a sustainable path back to 2%” – his target goal – after reaching around 7% during the COVID-19 pandemic, and as unemployment rises.
According to Jerome Powell, the nearly full percentage point increase in the unemployment rate over the past year is largely due to an increase in labor supply and a slowdown in hiring, not to an acceleration in layoffs.
The Fed chairman also insisted that the central bank wanted to prevent any further erosion of employment, a statement that contrasts with his previous remarks.
“We will do everything in our power to support a strong labor market as we continue to move toward price stability,” he said.
“With an appropriate reduction in restrictive policy, there are good reasons to believe that the economy will return to a 2% inflation rate while maintaining a strong labor market.”
The rapid rise in prices led the Fed to raise its benchmark policy rate from near zero to the current range of 5.25% to 5.50%, its highest level in a quarter-century.
That rate has held for more than a year, even as inflation has slowed and economic growth has persisted, the makings of a classic “soft landing.”
“While the task is not complete, we have made significant progress” in restoring price stability, Jerome Powell said.
The Fed considers prices to be stable when the PCE consumer price index increases by 2%. It is currently around 2.5%.
(Reporting by Howard Schneider; by Kate Entringer, edited by Jean-Stéphane Brosse)
Copyright © 2024 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
