U.S. Federal Reserve Chair Jerome Powell said in a speech delivered on September 30 that more interest rate cuts are likely in coming months as inflation continues to moderate in America.
During a speech delivered in Nashville, Tennessee, the head of the U.S. central bank said that the 50-basis point interest rate cut implemented on September 18 reflected a “recalibration of policy” at the Fed as inflation continues to trend down to its 2% annualized target. Powell added that the central bank has now shifted its focus to the American labor market, which he said has “clearly cooled over the last year.”
However, while Powell indicated that further reductions in interest rates can be expected in coming months, the size of those cuts is by no means certain. The Fed Chair stressed that any future changes to interest rates will be dependent on economic data. “We are not on any preset course,” said Powell at a meeting of the National Association for Business Economics. “The risks are two-sided, and we will continue to make our decisions meeting by meeting.”
Balancing Inflation and the Economy
Powell’s latest comments on interest rates come nearly two weeks after the Federal Reserve lowered interest rates by 50-basis points, a move that was interpreted as aggressive by the stock market and has sparked a rally in both stocks and cryptocurrencies. Powell said the Fed continues to try and balance bringing inflation back down to its 2% target while also ensuring that the U.S. economy continues to grow at a healthy pace.
Inflation in the U.S. during August was 2.2%, according to the Federal Reserve’s preferred Consumer Price Expenditures (PCE) index. Futures markets are pricing in a 25-basis point interest rate cut at the Fed’s next policy meeting on November 7, followed by a 50-basis point cut at the central bank’s final meeting of the year on December 18.
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