Powell’s remarks provided little guidance on how quickly or how quickly the rates continue to move.
US Federal Reserve Chair Jerome Powell points out the possibility of interest rate cuts at the central bank’s September meeting, but says the risk of higher inflation remains, halting the cut rates for statements that walked the narrow line and acknowledging increased risks to the job market.
“The labour market appears to be well balanced, but it is a strange balance due to the significant slowdown in both the supply and demand of workers. This extraordinary situation suggests an increasing shortcoming of employment.
“However, it is also possible that upward pressure on prices from tariffs can dynamically spur more permanent inflation, which is also a risk that is assessed and managed.”
“The stability of unemployment and other labour market measures will allow us to proceed with caution as we consider changing policy attitudes. Yet, restrictive areas of policy, a changing balance of baseline outlook and risk may ensure that policy attitudes are adjusted.
Powell’s comments open the door to fee cuts at the Fed’s September 16-17 meeting, but also puts heavy weight on the work and inflation reports they receive before that. The next monthly employment report will be issued on September 5th with data on consumer and producer prices one week later.
US stocks rose after the statement, with traders allocating nearly 90% chances of an interest reduction of just quarter points from about 75% before the rate.
Standing ovation
Powell’s remarks did not provide guidance on how quickly or how quickly the rates continue to move. It could put more pressure from President Donald Trump. Trump has pressured Powell to call on Federal Reserve Gov. Lisa Cook to retire after expanding this week.
Powell received a standing ovation at the beginning of his remarks. This was an eight-year coda that shriveled criticism from Trump and promoted him to chairman in his first term, but quickly exacerbated his reluctance to maintain the loose monetary policy that Trump had hoped for. Powell was reappointed to his second four-year stint by President Joe Biden.
The Trump administration is calling for replacement with Powell and other members of the Governor’s Committee, in the hopes of appointing a majority of its seven members.
The Fed’s chairman said he could not remove the dispute over the interest rate decision and that Powell intends to offer his full term, ending in May.
In addition to the latest information on the economy, Powell has released a new Fed strategic framework that highlights the biggest employment obligations depend on price stability.
The Fed has put on interest rates on its policy from the current 4.25% to 4.5% since December as the agency began working on the potential impact on inflation.
Some policymakers, including Governor Christopher Waller, have argued that among those on the Powell list of possible alternatives, the impact is modest and short-lived, and that rate cuts are now guaranteed to weaken the job market.
Economic data since the Fed’s last meeting has raised staff in both directions, and the upcoming employment report for August gives a big sense of what the Fed says and does at its September meeting. The meeting includes new quarterly economic forecasts from policymakers, who were expected to see the need for two quarterly point rate cuts this year as of June.
