Jerome Powell is considering further rate cuts, after the first cut since 2020 announced on September 18.
The president of the American central bank (Fed), Jerome Powell, sees inflation continuing to slow in the coming months, and is considering further rate cuts, after a first cut since 2020 announced on September 18.
“Economic conditions pave the way for a further slowdown in inflation,” declared the chairman of the American Federal Reserve in Nashville (Tennessee) before the National Association for Business Economics Foundation (NABE), according to the text of his speech published in advance.
“The labor market is now roughly balanced. Long-term inflation expectations remain well anchored,” he said.
The Fed lowered its rates at the end of its last meeting, on September 18, for the first time since 2020.
She chose to lower them by half a percentage point directly rather than just a quarter of a point, to avoid seeing the job market deteriorate too sharply. Rates are now in the range of 4.75-5.00%.
“In the future, if the economy generally evolves as expected, policy will evolve over time towards a more neutral orientation”, that is to say lower rates, underlined Jerome Powell.
“But we are not on any predefined course. The risks are twofold and we will continue to make our decisions meeting by meeting,” between inflation and employment, he insisted.
Additional drops
Fed officials view “this as a process that will take place over a period of time, and not as something that we need to accelerate,” said the president of the institution.
He recalled that as they had reported at the end of the meeting, “if the economy behaves as expected, this would mean two additional declines this year”, or an additional half point less.
However, “if the economy slows more than expected, then we can lower (rates) more quickly, if it slows less than expected, we will lower more slowly,” added Jerome Powell.
The Fed’s main key rate has been, since July 2023, at its highest level since the early 2000s. But, in 14 months, “inflation has fallen and unemployment has increased, in both cases significantly. significant,” further underlined the head of the American Federal Reserve.
He reiterated that the decision to cut rates by a half point directly “reflects our growing confidence that with appropriate recalibration of our policy, labor market strength can be maintained in a growth environment. moderate economic growth and inflation moving sustainably towards our objective.
Inflation slowed in August. The PCE index, favored by the Fed and which it wants to reduce to 2%, thus fell to 2.2% over one year, compared to 2.5% in July. The CPI index stood at its lowest since February 2021, at +2.5% over one year.
