Federal Reserve Chair Jerome Powell said Wednesday that the Federal Reserve could cut interest rates at its September meeting if economic data continues on its current path.
“If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September,” Powell said.
Recent economic data has pointed toward inflation data falling back toward the central bank’s 2% target, while the unemployment rates has crept up above 4%. The Fed said in its policy statement Wednesday that it is attentive to risks on “both sides of its dual mandate,” which is maximum employment and stable prices.
Powell said Wednesday that central bankers would be “data dependent, but not data-point dependent” in determining when to cut rates.
“The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market,” Powell said.
The personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of 2.5% year over year in June. The next non-farm payrolls report is due out on Friday and is expected by some economists to show a slowdown in hiring.
“I don’t know think of the labor market in its current state as a likely source of significant inflationary pressures. So I would not like to see material further cooling in the labor market,” Powell said.
On Wednesday, the Fed held its benchmark rate steady at a target range of 5.25% to 5.50%. When the Fed decides to reduce rates, it is expected to be by 25 basis points, or 0.25 percentage points.
Powell said Wednesday a potential 50-basis point rate cut is “not something we’re thinking about right now.”
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