Federal Reserve Chair Jerome Powell addressed the recent interest rate cut in a speech in Nashville, emphasizing that future moves will be smaller and more gradual. Powell stated that the Federal Reserve aims to balance bringing down inflation with supporting the labor market, with decisions guided by data.
Powell indicated that if economic data remains consistent, there may be two more rate cuts this year, each in quarter percentage point increments. This stance contrasts with market expectations for more aggressive easing. Powell emphasized that the Federal Reserve is not in a hurry to cut rates quickly and will make decisions meeting by meeting.
Following Powell's remarks, stocks fell and Treasury yields rose. The Federal Open Market Committee recently approved a half percentage point reduction in the Fed's key overnight borrowing rate, reflecting a "recalibration" of policy to better address current economic conditions.
Powell expressed confidence in economic strength and projected inflation continuing to cool. Despite inflation being close to the central bank's 2% goal, core inflation, excluding gas and groceries, was still running at a 2.7% pace. Housing-related costs have been a stubborn area of inflation, with Powell expecting easing prices for rent renewals to eventually catch up.
Looking ahead, futures market pricing suggests a quarter-point reduction at the Fed's upcoming meeting, with a more aggressive half-point cut expected in December. Powell remains optimistic about the economy and sees inflation trends aligning with the Federal Reserve's objectives.
Overall, Powell's remarks signal a cautious and data-driven approach to future monetary policy decisions, reflecting a focus on maintaining economic stability while addressing inflation concerns. The Federal Reserve's actions will continue to be influenced by evolving economic conditions and a commitment to achieving long-term economic goals.