As inflation recedes and the job market cools, the Federal Reserve is poised to lower its key interest rate from a 23-year high, according to Chair Jerome Powell. The rate cut is expected to begin in mid-September, with Powell indicating the possibility of multiple reductions. He emphasized that inflation is under control, with the Fed targeting a 2% level.
The prospect of rate cuts led to a Wall Street rally, with economists predicting modest quarter-point reductions at three upcoming meetings. The Fed’s focus is on achieving a “soft landing” as it navigates economic challenges. Powell assured that rate decisions would be based on economic indicators rather than political considerations.
Powell acknowledged the Fed’s slow response to rising inflation post-pandemic, attributing it to prolonged supply chain disruptions. Despite challenges, the Fed aims to stabilize inflation at 2% while fostering a strong labor market. The Fed’s success in managing inflation without causing a recession was praised during a conference in Jackson Hole.
With a rate cut looming close to the presidential election, the Fed faces political criticism. However, Powell remains committed to maintaining economic stability and job growth throughout the process.
Overall, the Fed’s strategy aims to support a balanced economic recovery while addressing inflation concerns for a sustainable future.
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