Federal Reserve Chairman Powell Signals Continued Interest Rate Cuts in Neutral Stance
Federal Reserve Chairman Powell hinted on Monday that the Fed will persist in cutting interest rates to achieve a more neutral stance. However, he emphasized that the future trajectory of rates is not predetermined and will be assessed on a meeting-by-meeting basis.
Powell stated, "Looking ahead, if the economy progresses as anticipated, policy will gradually shift towards a more neutral stance." A neutral interest rate level neither hinders nor accelerates economic growth.
Nevertheless, Powell cautioned that the future path of interest rates is not set in stone, and the risks to the Fed's objectives of stable inflation and maximum employment are balanced.
The voting members of the Fed will continue to base their decisions on incoming economic data, with Powell underscoring the importance of a data-driven approach.
In a positive development suggesting a softer economic landing, Powell highlighted that concerns about the economy's strength have eased as the gap between gross domestic income and GDP has narrowed.
The recent Fed rate cut of 50 basis points aimed to support the labor market and drive inflation towards the 2% target. Despite ongoing disinflation, Powell affirmed that the labor market remains robust, minimizing the need for further cooling measures to achieve the inflation target.
Overall, Powell's remarks indicate a cautious yet optimistic approach to monetary policy, with a focus on maintaining economic stability and achieving inflation goals. Investors should monitor future Fed meetings and economic data for insights into the trajectory of interest rates and the broader economic outlook.
