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 further slowing of inflation”was to say the president 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 will specify.
The Fed lowered its rates at the end of its last meeting, on September 18, for the first time since 2020. It 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%.
“Going forward, if the economy generally develops as expected, policy will shift over time towards a more neutral orientation”that is to say lower rates, Jerome Powell will further underline. “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 will also say. He will recall that the decision to lower rates by half a point directly “reflects our growing confidence that with an appropriate recalibration of our policy, labor market strength can be maintained in an environment of 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.
