Washington: US Federal Reserve Chair Jerome Powell has said that “the time has come” for a monetary policy adjustment, in yet another indication that the central bank might begin much-anticipated interest rate cuts next month.
Powell made the remarks on Friday during an economic policy forum, underscoring that inflation is “much closer” to the central bank’s target of 2 per cent, Yonhap news agency reported.
“The time has come for policy to adjust,” he said in a keynote speech at the forum in Jackson Hole, Wyoming.
“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” he added.
Speculation has abounded over the possibility of a rate cut at the rate-setting Federal Open Market Committee (FOMC) meeting slated for Sept. 17-18. After last month’s FOMC meeting, Powell said a rate cut could be “on the table” as soon as September if conditions are met.
The minutes of the FOMC meeting last month showed that the “vast majority” of Fed policymakers indicated it might be appropriate to start lowering the benchmark interest rate next month should progress on inflation continue.
Powell pointed out progress on inflation.
“Inflation is now much closer to our objective, with prices having risen 2.5 per cent over the past 12 months,” he said.
“After a pause earlier this year, progress toward our 2 per cent objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2 per cent.”
The Fed chair also vowed to do “everything” the Fed can to support a stronger labour market.
“With an appropriate dialling back of policy restraint, there is good reason to think that the economy will get back to 2 per cent inflation while maintaining a strong labour market,” he said.
“The current level of our policy rate gives us ample room to respond to any risks we may face, including the risk of unwelcome further weakening in labour market conditions.”
The U.S. key rate has remained unchanged at the range of 5.25 to 5.50 per cent since a quarter percentage point increase to the current level in July last year. Before the freeze, the Fed carried out an aggressive rate-hiking campaign launched in March 2022 to bring down inflation.
–IANS