Ad Banner
Advertisement by Open Privilege
United States

Powell makes it more likely that the Fed will lower rates

Image Credits: UnsplashImage Credits: Unsplash
  • Jerome Powell's testimony highlights progress in reducing inflation and a softening labor market, suggesting potential interest rate cuts.
  • The Federal Reserve remains focused on achieving its 2 percent inflation target and ensuring maximum employment.
  • The timing of rate cuts will depend on forthcoming economic data, including inflation and employment reports.

Federal Reserve Chair Jerome Powell's recent testimony before the Senate Banking Committee has brought renewed attention to the possibility of interest rate cuts. In his semiannual monetary policy report, Powell highlighted the progress made in reducing inflation and the signs of a cooling labor market, indicating that the Federal Reserve might be approaching a phase where rate cuts could be considered.

"The economy has made considerable progress toward the Federal Reserve's 2 percent inflation goal, and labor market conditions have cooled while remaining strong," Powell stated during his testimony. This statement underscores the dual mandate of the Federal Reserve to promote maximum employment and stable prices.

Economic Progress and Inflation

Over the past two years, the U.S. economy has seen significant strides in curbing inflation, which had reached a four-decade peak. Powell noted that inflation has eased notably but remains above the Fed's long-term goal of 2 percent. The Personal Consumption Expenditures (PCE) price index, a key inflation measure, showed a 2.6 percent increase over the 12 months ending in May, indicating a downward trend but still above the target.

Powell emphasized the importance of ensuring that inflation continues to move towards the 2 percent goal sustainably. "Recent monthly readings have shown modest further progress," he remarked, highlighting the need for more data to confirm these trends before making any policy adjustments.

Labor Market Dynamics

The labor market, another critical factor in the Fed's decision-making process, has shown signs of softening. The unemployment rate has risen to its highest level in over two years, and new jobless claims have increased, indicating a weakening job market. Powell acknowledged these developments, stating, "The strong labor market has helped narrow long-standing disparities in employment and earnings across demographic groups".

Despite the cooling labor market, Powell noted that conditions remain robust, with payroll job gains averaging 222,000 jobs per month in the first half of the year. This strong job creation has been accompanied by an increase in labor force participation, reflecting a resilient labor market.

Monetary Policy Outlook

The Federal Reserve has maintained its key interest rate within a range of 5.25% to 5.5% since July last year, following a series of aggressive rate hikes to combat inflation. Powell's recent remarks suggest that the Fed is now considering the timing of potential rate cuts, depending on forthcoming economic data. "The decision on the timing of rate adjustments will depend on forthcoming reports on employment and inflation," Powell emphasized.

While the exact timing of the first rate cut remains uncertain, market indicators suggest a high probability of a rate reduction at the Fed's September meeting. Recent economic data, including the consumer price index and employment reports, will play a crucial role in shaping the Fed's decision.

Jerome Powell's testimony has provided a glimpse into the Federal Reserve's cautious yet optimistic approach to monetary policy. As the U.S. economy continues to show signs of progress in reducing inflation and a cooling labor market, the possibility of interest rate cuts is becoming more tangible. However, Powell's emphasis on the need for more data underscores the Fed's commitment to making informed and balanced policy decisions.

Ad Banner
Advertisement by Open Privilege

Read More

Culture United States
Image Credits: Unsplash
CultureJuly 13, 2024 at 1:30:00 AM

Why assigning tasks before vacation often fails

As the summer months approach and vacation plans are finalized, many professionals find themselves scrambling to delegate tasks before their well-deserved time off....

Housing United States
Image Credits: Unsplash
HousingJuly 12, 2024 at 11:30:00 PM

The pitfalls of co-owning property with relatives

Owning a property is often seen as a rite of passage, a step towards financial independence and stability. However, the path to homeownership...

Finance United States
Image Credits: Unsplash
FinanceJuly 12, 2024 at 11:30:00 PM

CHAPS: The backbone of high-value transactions in the UK financial system

The Clearing House Automated Payment System, commonly known as CHAPS, is a vital component of the UK's financial infrastructure. Established in 1984, CHAPS...

Self Improvement United States
Image Credits: Unsplash
Self ImprovementJuly 12, 2024 at 10:30:00 PM

How to tell if someone is lying

In an era where misinformation and deception seem to be on the rise, the ability to discern truth from falsehood has become an...

Self Improvement United States
Image Credits: Unsplash
Self ImprovementJuly 12, 2024 at 9:30:00 PM

Speed up your success: 2 powerful ways to reach your goals more quickly

Achieving your goals can often feel like an uphill battle, but with the right strategies, you can fast-track your success. Two powerful techniques...

Financial Planning United States
Image Credits: Unsplash
Financial PlanningJuly 12, 2024 at 6:00:00 PM

Tips on how to make the most of possible Fed interest rate cuts

As the Federal Reserve (Fed) contemplates lowering interest rates, individuals need to be proactive in managing their finances to capitalize on potential changes...

Health & Wellness United States
Image Credits: Unsplash
Health & WellnessJuly 12, 2024 at 4:30:00 PM

A famous bodybuilder talks about the two supplements he definitely wouldn't use

Renowned bodybuilding coach Cliff Wilson, a prominent figure in the fitness world, is known for his expertise in guiding athletes to peak performance....

Relationships United States
Image Credits: Unsplash
RelationshipsJuly 12, 2024 at 4:00:00 PM

Do you need a "social-media concierge" for your wedding?

Weddings have evolved beyond traditional ceremonies and receptions. With the rise of social media platforms like Instagram and TikTok, couples are now faced...

Financial Planning United States
Image Credits: Unsplash
Financial PlanningJuly 12, 2024 at 4:00:00 PM

Essential money lessons for kids and teens

Teaching children about money has become more crucial than ever. As parents, we have the responsibility to equip our kids with the financial...

Technology United States
Image Credits: Unsplash
TechnologyJuly 12, 2024 at 2:30:00 PM

The bad side of social media: Telling the dark truth

Social media has become an integral part of our daily lives, connecting us with friends, family, and the world at large. However, beneath...

Housing United States
Image Credits: Unsplash
HousingJuly 12, 2024 at 2:30:00 PM

As a result of high housing costs, divorced couples are still living together

In today's challenging real estate market, a new and unexpected trend is emerging: divorced couples continuing to live together due to skyrocketing housing...

Tech United States
Image Credits: Unsplash
TechJuly 12, 2024 at 1:30:00 PM

Tesla's autonomous ambitions hit speedbump: Robotaxi event postponed

Tesla, the electric vehicle pioneer led by tech visionary Elon Musk, has announced a delay in the unveiling of its much-anticipated robotaxi. This...

Ad Banner
Advertisement by Open Privilege
Load More
Ad Banner
Advertisement by Open Privilege