US Fed Chair Jerome Powell: US inflation is slowing again, though it isn't yet time to cut rates
Jerome Powell declined to give any specific guidance on the timing of the first rate reduction.
Federal Reserve Chair Jerome Powell said the latest economic data suggest inflation is getting back on a downward path, but emphasized officials need more evidence before lowering interest rates.
While Powell declined to give any specific guidance on the timing of the first rate reduction, he did acknowledge the Fed has made “quite a bit of progress” in reducing inflation. The Fed chief added he’d like to see that progress continue.
“Because the US economy is strong and the labor market is strong, we have the ability to take our time and get this right,” Powell said during a panel Tuesday at the European Central Bank Forum on Central Banking in Sintra, Portugal. “And that’s what we’re planning to do.”
When Powell was asked what keeps him up at night, he pointed to the delicate balance between taming inflation and avoiding a significant deterioration in the labor market.
“It’s very much understood by us that we have two-sided risks, and we have to manage them,” Powell said during the panel with ECB President Christine Lagarde and Brazil’s central bank chief Roberto Campos Neto.
After a lack of further progress toward the central bank’s goal in the first few months of 2024, data out last week painted a more promising picture. The Fed’s preferred measure of underlying inflation rose just 0.1% in May, marking the smallest advance in six months.
But some Fed officials have begun to elevate the labor market as a point of concern. Hiring has also cooled, and the unemployment rate — while still historically low at 4% — has edged higher in recent months.
San Francisco Fed President Mary Daly said last week that the job market is nearing an inflection point, where further slowing could lead to rising joblessness. Powell expressed a similar sentiment, noting the US is getting to the place where further declines in job openings have traditionally meant higher unemployment.