The Federal Reserve Chair, Jerome Powell, hinted at the possibility of more interest rate cuts in the future. However, he emphasized that the size and speed of these cuts will depend on how the economy evolves in the coming months.
At their meeting on September 18th, Fed officials suggested two more quarter-point rate cuts at their final 2024 meetings in November and December. Powell stated that the current U.S. economy and job market are stable, highlighting that the economy is healthy.
He mentioned that there is a need to “recalibrate” key interest rates which are currently at about 4.8%, with plans to move towards a “more neutral stance.” This implies a level where it neither stimulates nor holds back economic growth.
Additionally, Powell highlighted that the goal of the Fed is to support an already strong economy rather than rescuing a weakening one or preventing a recession.
Regarding economic indicators, inflation has fallen to 2.2% as per August’s report by government agencies. Core inflation (which excludes food and energy costs) has increased slightly to 2.7%. The unemployment rate has decreased slightly to 4.2% but remains higher compared to last year’s low of 3.4%.
Powell acknowledged that while hiring has slowed down over recent months and may continue doing so with an average of only 116,000 jobs added monthly (half its pace from last year), he still believes it’s solid but “cooling”.
Furthermore, Powell claimed lowering borrowing costs for consumers and businesses would be beneficial following rate reductions by reducing mortgage rates or credit card fees.
As part of this strategy on recalibrating policy stances,”Thomas Barkin”, President of Richmond Fed stated his belief in cutting rates conservatively rather than heading straight for neutral setting when interviewed by AP last week , indicating not all members might favor rapid further cuts like “Austan Goolsbee” who predicted “many” more rate cuts over next one year.”
In conclusion this shift towards dual focus on employment alongside long followed objective had been pointed out reasoning behind recent cut -that due slowing hiring accompanied rising unemployment- splitting attention once onto fighting price increases only for past three years spurred move.Accordingly shifting gears acknowledging both “headlining max employment” combined keeping prices stable , alignment adjustments visuals needed recalibrated now too.Predictions currently show likelihood potential preferences preferring moderate reduction first before reaching full neutrality as sought after outcome in policy revisions being considered underway presently based same implications require factor residuals uncertainties underlying requisitions fed was able decide envisaged measure could bring stabilizing safe grounds.