continued economic growth, a solid job market, and Inflation that remains above the 2% target Federal Reserve Chairman Jerome Powell said on Thursday that this means the central bank does not need to rush to lower interest rates and can deliberate carefully.
In comments consistent with growing expectations in financial markets for a lower rate cut next year than Fed officials had previously forecast, Powell confirmed that he and his fellow policymakers still see inflation “on a sustainable path to 2%.” Believes who will allow. The central bank will move monetary policy “to a more neutral setting over time.”
But the pace of rate cuts “is not predetermined,” Powell said at a Dallas Fed event, adding, “The economy is not sending any signal that we need to rush to lower rates. The strength we currently have in the economy is You see, it gives us the ability to take our decisions carefully.”
Fed officials and investors are taking stock of how America’s economic strength continues and the uncertainty surrounding the economic agenda of President-elect Donald Trump’s administration. tax cuts, Tariff And immigration action could affect economic growth and inflation.
After last week’s election, which changed voters’ perception of the country’s economic ills, Powell said the current situation was actually “remarkably good.”
The forces of the economy include a Unemployment rate still at an all-time low of 4.1%What Powell called a “strong” 2.5% annual pace remains above the Fed’s estimate of consumer spending driven by its underlying potential, rising disposable incomes and rising business investment.
Yet key measures of inflation remain above targets.
personal consumption expenditure price index The data for October has not yet been released, but Powell said the most recent data it includes shows that PCE, excluding food and energy costs, rose by 2.8% last month – which would be the fourth consecutive month. In which the indicator is paused.
The Fed uses the headline PCE reading to set its 2% inflation target — Powell said the figure is likely to be around 2.3% in October — while considering the “core” measure a guide to the direction of underlying inflation. goes.
Traders expect the Fed to cut interest rates by another quarter percentage point at its Dec. 17-18 meeting, but the combination of Trump’s election victory and steady inflation readings has them anticipating fewer cuts next year.
Powell said the central bank is still confident in the ongoing deflation process, but is also cautious as it keeps an eye on things like housing costs.
Key aspects of inflation “have returned to rates close to our targets… We are watching carefully to ensure that they do… Inflation is running very close to our 2% long-term target, But it’s not there yet,” she said.
