Federal Reserve Chair Jerome Powell indicated that the Fed is prepared to start cutting its key interest rate from its current 23-year high as inflation appears to be under control and the job market is cooling, AP News reports.
Although Powell did not specify the timing or size of the cuts, a quarter-point reduction is widely expected in September. Powell emphasized that the Fed’s focus is shifting from fighting inflation to maintaining economic growth and employment. He emphasized that further cuts will depend on economic data and risks, hinting at a possible series of reductions. He also acknowledged past misjudgments regarding the persistence of inflation post-pandemic but highlighted that inflation is now on a sustainable path to the Fed’s 2% target.
Powell’s remarks boosted confidence on Wall Street, leading to a rally in stocks and a drop in bond yields. Powell’s speech indicated a cautious but optimistic outlook, aiming for a “soft landing” where inflation falls without triggering a recession.
