Federal Reserve Chair Jerome Powell laid the groundwork Friday for interest rate cuts ahead, though he declined to provide exact indications on timing or extent.
“The time has come for policy to adjust,” the central bank leader said in his much-awaited keynote address at the Fed’s annual retreat in Jackson Hole, Wyoming. “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.”
With markets awaiting direction on where monetary policy is headed, Powell focused as much on a look back at what caused the inflation that led to an aggressive series of 11 rate hikes from March 2022 through July 2023.
However, he did note the progress on inflation and said the Fed can now turn its focus equally to the other side of its dual mandate, namely to make sure the economy stays around full employment.
“Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic,” Powell said. “Supply constraints have normalized. And the balance of the risks to our two mandates has changed.”
He vowed that “we will do everything we can” to make sure the labor market says strong and progress on inflation continues.
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