Federal Reserve (Fed) Chair Jerome Powell indicated on Monday that additional rate cuts are likely upcoming, without specifying the size of the potential next reduction. Powell emphasized that the Fed is not following a predetermined path.
Powell stated that the U.S. economy appears to be heading towards a continued decline in inflation, enabling the Fed to lower its benchmark interest rate and eventually reach a level that does not hinder economic activity. He made these comments at a National Association for Business Economics (NABE) conference in Nashville, Tennessee, suggesting no clear preference for a faster or slower pace of reductions in borrowing costs.
“Disinflation has been widespread, and recent data show progress towards a sustained return to the Fed’s targeted 2% inflation level,” Powell noted. He added, “If the economy progresses as anticipated, policy will gradually move towards a more neutral stance. However, we are not committed to a fixed course of action. We will continue to assess risks and make decisions on a meeting-by-meeting basis.”
When asked about the outlook for rate cuts, Powell mentioned a gradual process that would unfold over time. He reiterated that the Committee does not feel pressured to rapidly reduce rates.
The Federal Open Market Committee reduced rates by half a percentage point at its September meeting, marking a shift from the previous range to the current 4.75%-5.00% range. Economic projections from that meeting indicated a further decline in rates towards the end of the year.
Investors have differing opinions on whether the Fed will implement a series of quarter-percentage-point cuts or make a substantial cut if the job market weakens or inflation slows more than expected.
Economy ‘in solid shape’
Powell’s mention of “two-sided” risks underscores the ongoing debate as new data emerges. He pointed to the recent U.S. employment report for September as part of the discussion on what to expect before the next meeting in November.
While recent inflation data aligns with the Fed’s target, Powell emphasized that broader economic conditions suggest further disinflation. He highlighted declining goods prices and stagnant service industry inflation as key factors influencing the overall inflation trend.
Despite challenges in the housing market, Powell noted that the job market remains strong. He expressed confidence in the economy’s current state and reiterated the Fed’s commitment to maintaining stability.
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Emil Kovács graduated from the Journalism program at Eötvös Loránd University in Hungary. During his journalism studies, he focused on data journalism, investigative reporting, and multimedia storytelling. He gained experience by writing for the university’s student newspaper, where he gained attention for his articles on social issues. After graduation, Emil began working as a reporter at a European news agency, where he conducts in-depth analyses of international news and current events.
