Speaking at the central bank’s annual Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell gave the green light to lowering interest rates. He said the time has come for monetary policy to change, and the timing and pace of the cuts will depend on incoming data, the evolving economy, and other factors.
The Fed chief says since inflation has eased, the job market is “no longer overheated,” and the global supply chain has normalized, now is the time to adjust the rates. However, he’s not saying how much the rates will be cut or when it will happen.
Powell’s speech comes as the Fed’s preferred inflation gauge—the personal consumption expenditure price index—slowed to 2.5 percent. Meanwhile, the unemployment rate rose to 4.3 percent in July, the highest level since October 2021.
By the way, Powell attributes the jump in jobless numbers to more individuals entering or returning to the workforce and a slower pace of hiring.
You should know that the Fed maintains a dual mandate of price stability and maximum employment.
Ted Rossman, senior industry analyst at Bankrate, says the main theme of Powell’s speech was that while fighting inflation has been the Fed’s primary objective over the past couple of years, since it’s easing, now is the time to put more attention on maximum employment. He went on to say while Powell acknowledged a weakening job market, he says it’s still in pretty good shape, and doesn’t want it to get any worse.
You should know that the markets responded favorably to Powell’s speech, and leading benchmark indexes rallied as much as 1.8 percent in response to his remarks.
By the way, the Fed’s next meeting will take place next month.
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