2024-08-23 18:25:14
The head of the US Federal Reserve, Jerome Powell, gave a clear signal to reduce borrowing costs, saying that the Fed is ready to cut interest rates in September.
“It’s time for our policy to adjust,” the Fed chairman told the his long-awaited speech in Jackson Hole of Wyoming.
“The direction is clear and the timing and pace of interest rate cuts will depend on statistical data, the evolving outlook and the balance of risks,” he said, warning that “risks” for the labor market loom.
Powell said the Fed will “whatever he can to support a strong labor market as we “make further progress on price stability”.
Along the same lines, he warned that “the risks to a rise in inflation have decreased but the risks to employment have increased.”
The Fed is expected to implement its decision in the middle of next September, six weeks before the US presidential election.
The economy in general, inflation and high borrowing costs were major concerns for American voters, causing further damage to Joe Biden’s approval ratings.
Powell noted that inflation has eased “significantly” since the unexpected spike at the start of the year, so much so that he has “increased confidence that inflation is on a sustainable path” toward the Fed’s 2 percent target.
Inflationary price pressures eased without a sharp increase in job losses, defying many economists’ predictions of a recession in the world’s largest economy.
Powell said the Fed “does not seek or desire further warming in the labor market” and expressed confidence that the Fed can achieve a soft “landing,” meeting its inflation targets without causing economic damage.
The Fed chairman also provided a detailed assessment of why inflation has soared.
It also explained why the Fed initially believed that the uptick in inflation would be short-lived and attributed the bulk of the rise in the price level to the timing-emergency coincidence of strong and temporarily distorted demand combined with tight supply.”