The real POTUS at the Fed is planning on making some moves. Trump says he will raise rates when he is elected, as it is political.
Federal Reserve Chair Jerome Powell has reiterated his focus on a cooling job market, suggesting to market observers that the central bank might be moving closer to cutting interest rates. Speaking to House lawmakers on Wednesday, Powell acknowledged that the Fed has long concentrated on controlling inflation but now sees the labor market reaching a more balanced state, prompting a broader consideration of both inflation and employment.
“I think for a long time, we’ve had to focus heavily on the inflation mandate,” Powell explained, referencing the dual mandate of the Federal Reserve to ensure stable prices and maximum employment. “But I think now we’re getting to the place where the labor market is getting pretty much in balance to where it needs to be, and so we’re looking at both sides.”
A shift in Federal Reserve Chair Jerome Powell’s labor-market outlook moves the central bank closer to lowering interest rates. https://t.co/aj2MUjrLwE pic.twitter.com/f83Gp0dhPK
— WWU Center for Economic and Business Research (@PugetSoundEF) July 10, 2024
The Fed has maintained interest rates at their highest levels in 23 years for nearly a year to curb inflation. However, with inflation beginning to cool, Powell highlighted the growing awareness of the risks posed by a cooling labor market. This shift in focus was underscored by the recent rise in the unemployment rate to 4.1% in June, a modest increase from the previous month’s rate and up from 3.4% early last year. While still low by historical standards, the rising unemployment rate signals a potential easing of labor market tightness.
Powell’s remarks have fueled speculation among Fed watchers that a rate cut could be on the horizon, possibly as soon as September. Nevertheless, Powell emphasized the need for more data on cooling inflation before any concrete decisions are made. The upcoming Consumer Price Index (CPI) report for June will be a critical indicator for the Fed, providing further insights into inflation trends.
Progress on Inflation: A Closer Look at Fed Chair Powell’s Testimonyhttps://t.co/TIStbFJupa
— TipRanks (@TipRanks) July 10, 2024
While expressing some confidence that inflation is on a downward trajectory towards the Fed’s 2% target, Powell stopped short of declaring victory. “I am not prepared to say that yet,” he noted, indicating that the central bank remains cautiously optimistic but vigilant.
Powell’s testimony before the House Financial Services Committee, part of his semiannual congressional appearances, also touched on the importance of the Fed’s independence, especially during an election year. Committee chair Patrick McHenry urged Powell to ensure that monetary policy remains free from political influence, a sentiment echoed by other lawmakers concerned about the timing of potential rate cuts.
When asked if a rate cut in September could be perceived as politically motivated so close to an election, Powell firmly denied that political considerations would influence the Fed’s decisions. “It is just not appropriate for us to get into thinking about election cycles,” he asserted, pledging to continue his duties irrespective of the political landscape.
Powell reaffirmed his commitment to the Fed’s mission, stating, “This is my fourth presidential election at the Fed, and I can tell you, we come to work the next day and do our jobs,” underscoring the central bank’s dedication to its objectives of maintaining economic stability.
Federal Reserve Chair Jerome Powell’s testimony before Congress highlighted the progress in reducing inflation and the softening labor market, suggesting that the Fed is inching closer to considering interest rate cuts.#FederalReserve #InterestRateshttps://t.co/ZHWZTU1MrH
— Open Privilege (@OpenPrivilege) July 10, 2024
Key Points:
i. Fed Chair Jerome Powell highlights a balanced focus on inflation and employment, indicating potential interest rate cuts.
ii. The labor market shows signs of cooling, with the unemployment rate rising to 4.1% in June.
iii. Speculation grows that the Fed may cut rates as early as September, pending further inflation data.
iv. Powell reaffirms the Fed’s independence from political influence during an election year.
v. The Fed continues to monitor economic indicators to guide its monetary policy decisions.
Kirk Volo – Reprinted with permission of Whatfinger News
