Federal Reserve Chairman Jerome Powell announced at the annual economic conference in Jackson Hole that inflation is largely under control, following the worst price spike in four decades. Powell stated that the Fed will soon begin cutting its key interest rate from its 23-year high, although he did not specify when cuts would start or how large they might be. It is widely anticipated that a modest quarter-point rate cut will be announced during the mid-September meeting.
Powell highlighted the importance of maintaining a strong labor market and supporting economic growth through rate cuts, which could potentially aid Vice President Kamala Harris’ presidential campaign. The Fed’s preferred measure shows inflation currently at 2.5%, down from a peak of 7.1% two years ago and just above the central bank’s 2% target level.
Although a rate cut close to the upcoming presidential election could draw political criticism, Powell emphasized that the Fed’s decisions are based solely on economic data and not influenced by political considerations. Former President Donald Trump has expressed opposition to rate cuts near election time, but Powell reiterated the importance of focusing on the economy’s needs rather than political factors. Ultimately, the goal of the rate cuts is to achieve 2% inflation while sustaining a strong labor market.
By signaling the intent to cut rates, Powell aims to steer the economy towards stability and growth in the face of ongoing challenges stemming from the coronavirus pandemic.
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