WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell took more interest Monday Rate reduction are in the pipeline, but it has been suggested that they will happen at a measured pace More healthy economy.
His comments at the National Association for Business Economics conference in Nashville, Tenn., dashed many investors’ hopes that the Fed would implement another steep half-point cut in its key rate before the end of the year. The central bank cut its rate by half a point larger than usual Earlier this month As it moved beyond its inflationary struggle to supporting the labor market.
The broader S&P 500 stock index was down 0.2% in midday trading, while the Dow Jones Industrial Average was down 0.5%.
“We look at it as a process that will play out over time,” Powell said during a question-and-answer session, referring to the Fed’s interest rate cuts, “and not something that we have to go too fast at. It depends on the data, how fast we actually go.”
Sep. At their last meeting on the 18th, central bank officials cut their benchmark rate to 4.8% from a two-decade high of 5.3%, and headed for two more quarter-point rate cuts in November and December. On Monday, Powell said that was the most likely outcome.
“If the economy performs as expected, that would mean two more cuts this year,” both by a quarter point, Powell said.
In prepared remarks, Powell said the U.S. economy and hiring are largely healthy, and insisted that the Fed is “recalibrating” its key interest rate, as opposed to cutting quickly in an emergency situation.
He also said the rate is moving to a “more neutral position” that neither stimulates nor pulls back the economy. Central bank officials have set the so-called “neutral rate” at 3%, significantly lower than the current level.
Powell emphasized that the Fed’s current goal is mostly to support a healthy economy and job market, rather than to rescue a struggling economy or prevent a recession.
“Overall, the economy remains solid,” Powell said in written comments. “We want to use our tools to keep it there.”
Inflation, according to the central bank’s preferred measure, It fell to just 2.2% in AugustThe government said on Friday. Core inflation, which excludes volatile food and energy categories and generally provides the best reading on underlying price trends, edged up slightly to 2.7%.
Meanwhile, the unemployment rate fell to 4.2% from 4.3% last month, but remains nearly a full percentage point higher than the half-century low of 3.4% reached last year. Hiring has fallen by an average of 116,000 jobs a month over the past three months, half the pace from a year ago.
Over time, the Fed’s rate cuts should lower borrowing costs for consumers and businesses, including lower rates for mortgages, auto loans and credit cards.
“Our decision … reflects our growing confidence that with an appropriate rebalancing of our policy stance, strength in the labor market can be maintained in an environment of moderate economic growth and inflation moving steadily toward 2%,” Powell said.
Several policymakers have given speeches and interviews since the Fed’s rate cut, with some clearly advocating more rapid cuts, while others have taken a more cautious approach.
Austen Goolsbee, president of the Fed’s Chicago branch, said the Fed will implement “many more rate cuts over the next year.”
Richmond Fed President Tom Parkin said in a statement Interview With The Associated Press last week, he said he supported cutting the central bank’s key rate “somewhat” but was not ready to cut it to a neutral setting just yet.
A big reason the central bank is cutting its rate is because hiring has fallen and unemployment has risen, threatening to slow the broader economy. The Fed is required by law to maintain stable prices and maximum employment, and Powell and other policymakers have for nearly three years underscored a dual focus on jobs and inflation, with the focus on fighting inflation.
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