The United States Federal Reserve has announced a rise in its benchmark policy rate, marking the highest level in a quarter of a century. Chairman Jerome Powell endorsed further interest rate cuts to address rising inflation and unemployment. In a speech at the Fed’s annual conference in Wyoming, Powell expressed confidence that inflation is on track to reach the central bank’s 2 percent target but noted an increase in the unemployment rate.
Powell emphasized the importance of supporting a strong labor market while working towards price stability. Traders are predicting a quarter-percentage-point rate cut at the Fed’s September meeting, with a one-in-three chance of a half-percentage-point cut. The Fed is expected to continue easing its policy rate, with futures pricing in a rate of 3 percent to 3.25 percent by the end of 2025.
The recent comments by Powell signal a new chapter in monetary policy, following the Fed’s decision to begin rate cuts to address inflation concerns. While there has been progress towards restoring price stability, Powell emphasized that the task is not yet complete. The Fed’s July meeting indicated that a majority of policymakers agreed on the need for rate cuts to begin in the near future.
Powell’s speech at the conference clarified the Fed’s stance on monetary policy, with a focus on addressing inflation and maintaining a strong labor market. Further details on the Fed’s economic projections and rate decisions are expected to be provided at the next meeting. Powell’s remarks solidified the Fed’s commitment to supporting the economy while gradually easing policy rates.
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