KEEPING TO THE PATH
Powell, over his two days of commentary before the Senate and House committees that oversee the central bank, indicated the Fed was edging closer to a rate cut decision, while also insisting that he was not yet ready to declare that inflation had been beaten.
Powell and other Fed officials have said they will not cut interest rates until they have gained even greater confidence that inflation is headed back to the central bank’s 2 per cent target after a breakout surge during the pandemic.
“I do have some confidence of that,” Powell said when asked directly if he felt the bar to cutting interest rates had been cleared, but “I am not ready to say that yet”.
Recent data, however, has been encouraging, Powell told lawmakers, and he emphasised that risks to the job market now stand on about equal footing with the risks of high inflation – with the Fed intent on meeting both its price stability and full employment goals.
“There is a path to getting back to full price stability while keeping the unemployment rate low,” Powell said. “We’re on it. We’re very focused on staying on that path.”
From ongoing growth to a 4.1 per cent unemployment rate and falling inflation, Powell said the US was enjoying “good numbers”.
After hitting a 40-year high in 2022 the Fed’s preferred measure of inflation, the Personal Consumption Expenditures Price Index, was 2.6 per cent as of May.
Powell reiterated the central bank will need to cut rates before the figure returns fully to 2 per cent but after the underlying momentum seems likely to take it there.
The Fed next meets on Jul 30 to Jul 31. While officials are expected to maintain the benchmark interest rate at the comparatively high 5.25 per cent to 5.5 per cent range approved in July of 2023, further progress on inflation could lead to key changes in their policy statement that pave the way for a September cut.
The next inflation report will be issued on Thursday. Powell has more public remarks set for Monday at the Economic Club of Washington.
As they did in a Tuesday hearing before the Senate Banking Committee, lawmakers quizzed Powell on a variety of issues beyond monetary policy.
Republicans in particular focused on bank regulatory proposals that have drawn opposition from the industry and GOP officials.
His other comments on Wednesday largely tracked the Tuesday hearing in the Senate, which analysts feel showed both increased faith in a continued decline in inflation and a growing sensitivity to the risks of keeping monetary policy too tight for too long and slowing the economy more than necessary.
As he did on Tuesday, Powell told House members that “more good data” would build the case for the US central bank to cut interest rates.
From: channelnewsasia
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