‘Time has come’ for Fed rate cuts, says Powell
Chair Jerome Powell said the time has come for the Federal Reserve to cut its key policy rate, affirming expectations that officials will begin lowering borrowing costs next month and making clear his intention to prevent further cooling in the labor market.
“The time has come for policy to adjust,” Powell said Friday in the text of a speech at the Kansas City’s Fed’s annual conference 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.”
The Fed chief also acknowledged recent progress on inflation, which has resumed moderating in recent months after stalling earlier in the year: “My confidence has grown that inflation is on a sustainable path back to 2%,” he said, referring to the central bank’s inflation target.
While those remarks provided some clarity for financial markets in the near term, they offered few clues as to how the Fed might proceed after its September gathering.
Still, the speech confirmed the Fed is on the cusp of a key turning point in its two-year battle against inflation. For most of that time, the labor market proved surprisingly sturdy, giving officials room to focus doggedly on lowering inflation toward the central bank’s 2% target.
The Fed has held its benchmark rate in a range of 5.25%-5.5% — its highest level in more than two decades — for the last year in support of that goal, propping up borrowing costs across the economy.
Yet just as inflation has neared its target, cracks have appeared on the employment front, prompting several Fed officials to worry that high rates now pose a threat to the economy’s continued strength. Warning signals included a disappointing July
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