US Fed’s Powell says ‘time has come’ to lower interest rates
Al Jazeera
Powell says the ‘downside risks to employment have increased’ as he lays out his rationale for rate cuts.
United States Federal Reserve Chairman Jerome Powell has offered an explicit endorsement of interest rate cuts, saying further cooling in the job market would be unwelcome and expressing confidence that inflation is within reach of the central bank’s 2 percent target.
“The upside risks to inflation have diminished. And the downside risks to employment have increased,” Powell said on Friday in a highly anticipated speech at the Fed’s annual economic conference in Jackson Hole, Wyoming. “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”
Referencing the two tasks that Congress has given to the Fed, Powell said his “confidence has grown that inflation is on a sustainable path back to 2 percent” after rising to about 7 percent during the COVID-19 pandemic but unemployment is increasing.
While Powell said the jump of nearly a percentage point in the unemployment rate over the past year was due largely to rising labour supply and slowed hiring, not increased layoffs, he also was emphatic that the Fed wants to prevent any further erosion in the jobs market and his prior talk of labour market “pain” as necessary to control inflation was now a thing of the past.
The current unemployment rate of 4.3 percent is roughly at the level Fed officials feel is consistent with stable inflation over the longer run.
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