U.S. Economy Poised for Continued Slowdown in Inflation, Says Fed Chair Powell

Federal Reserve Chair Jerome Powell stated that continued slowdown in inflation could prompt the Fed to cut its benchmark interest rate over time. He mentioned a balanced approach to rate cuts and highlighted the progress towards a 2% inflation target. Employment and housing inflation data are key factors.

Federal Reserve Chair Jerome Powell indicated a potential continued slowdown in inflation, which could lead to a cut in the benchmark interest rate. Powell's remarks, made during the National Association for Business Economics conference in Nashville, showcased no clear inclination towards either a faster or slower pace of rate reductions.

Powell emphasized that disinflation is broad-based and recent data signals progress towards a sustained return to the Fed's 2% targeted inflation level. He noted, "If the economy evolves broadly as expected, policy will move over time toward a more neutral stance." However, Powell warned of two-sided risks, stating, "We are not on any preset course and will continue to make decisions meeting by meeting."

The Fed recently cut rates by half a percentage point and projections suggest a further decline by the end of the year. Market sentiments are divided on whether the central bank will opt for more gradual cuts or a significant reduction if economic conditions, such as job markets and inflation, falter. Powell reassured that the overall economy remains robust and the Fed's tools will be used to maintain it.