Federal Reserve Chair Jerome Powell on Friday indicated that the central bank would soon begin cutting interest rates.
Speaking at an annual gathering in Jackson Hole, Wyoming, Powell said the “time has come” for the Fed to adjust its interest rate policy. The announcement comes after a yearslong effort to fight inflation with highly elevated interest rates.
At previous meetings, Powell said the Fed needed to be confident that inflation had begun moving sustainably downward to its target rate of 2% before instituting rate cuts. On Friday, Powell appeared to indicate that the Fed had achieved that objective.
“My confidence has grown that inflation is on a sustainable path down to 2%,” Powell said.
Price increases have slowed significantly from a peak of more than 9%, but inflation remains more than a percentage point higher than the Fed’s target rate of 2%.
In recent months, the labor market has slowed alongside cooling inflation. That trend was highlighted last month by a weaker-than-expected jobs report that raised concern among some economists that the U.S. may be headed toward a recession.
The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In theory, low interest rates help stimulate economic activity and boost employment; high interest rates slow economic performance and ease inflation.
Recent economic developments have shifted the Fed’s focus away from controlling inflation and toward ensuring a healthy labor market, Powell said. The unemployment rate has ticked up this year from 3.7% to 4.3%.
“A cooldown in the labor market is unmistakable,” Powell said.
This is a developing story. Please check back for updates.
Source Agencies
