New Delhi [India], August 23 (ANI): US Federal Reserve Chair Jerome Powell gave a strong indication that it was time for the US central bank to reduce interest rates as inflation rates were aligning with its target.
Addressing the much-awaited Jackson Hole Symposium on Friday, Powell said that “the time has come for policy to adjust” but stopped short of giving a hint on the quantum of interest rate cut.
“The time has come for policy to adjust. 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,” Powell said.
Faced with high inflation during the Covid-19 pandemic, the US monetary policy committee, as part of its commitment to restoring price stability, raised the policy rate by 425 basis points in 2022 and another 100 basis points in 2023. It held the policy rate at its current restrictive level since July 2023.
For much of the past three years, inflation ran well above Fed’s 2 percent goal, and labor market conditions were extremely tight.
The summer of 2022 saw the peak of inflation in the US, and since then it witnessed a 4-4.5 percentage point decline in inflation from its peak.
“Our restrictive monetary policy contributed to a moderation in aggregate demand, which combined with improvements in aggregate supply to reduce inflationary pressures while allowing growth to continue at a healthy pace,” Powell said.
“After a pause earlier this year, progress toward our 2 percent objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2 percent,” he said.
Consumer prices in the US rose 2.9 per cent over the 12 months to July, the smallest annual increase since March 2021, as against 3 per cent in June. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
In the latest meeting held on July 30-31, 2024, the Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate at 5.25 to 5.5 per cent. During the COVID-19 pandemic, the interest rates were near zero.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
The majority of the Fed members, in the latest monetary policy meeting, indicated a policy rate cut in the September meeting, according to the Fed minutes released this week.
But not everything is fine in the US labour market.
Powell said that the labor market has cooled considerably from its formerly overheated state, but is still on the higher side.
“The unemployment rate began to rise over a year ago and is now at 4.3 percent–still low by historical standards, but almost a full percentage point above its level in early 2023 (figure 2). Most of that increase has come over the past six months. So far, rising unemployment has not been the result of elevated layoffs, as is typically the case in an economic downturn. Rather, the increase mainly reflects a substantial increase in the supply of workers and a slowdown from the previously frantic pace of hiring,” Powell explained. (ANI)
Disclaimer: This story is auto-generated from a syndicated feed of ANI; only the image & headline may have been reworked by News Services Division of World News Network Inc Ltd and Palghar News and Pune News and World News
HINDI, MARATHI, GUJARATI, TAMIL, TELUGU, BENGALI, KANNADA, ORIYA, PUNJABI, URDU, MALAYALAM
For more details and packages
