Federal Reserve President Jerome Powell fulfilled market expectations by signalling that the central bank is ready to cut rates in his Jackson Hole symposium speech.
“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,” said Powell. “We will do everything we can to support a strong labor market as we make further progress toward price stability. With an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to 2 percent inflation while maintaining a strong labor market.”
Powell noted that the pandemic economy had been unique n its controbution to inflation with its economic shutdowns and snarled supply chains, job losses and “tectonic shifts” in global demand. As COVID restriction were lifted pent up spending contriubted to a historic surge in consumer spending on goods.
“Four and a half years after COVID-19’s arrival, the worst of the pandemic-related economic distortions are fading. Inflation has declined significantly,” said Powell. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic. Supply constraints have normalized. And the balance of the risks to our two mandates has changed.”
Powell celebrated sharp rate rises in 2022 as key to reducing inflation and bringing it once more in line with the Fed’s 2% inflation goal.
By Staff
