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02/07/24
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Powell Says Fed Has Made Progress in Cooling Inflation
On Tuesday, Federal Reserve Chair Jerome Powell forecast that U.S. inflation may drop to the central bank’s target of 2% by late next year or in 2026, but added that policymakers would be patient before implementing potential interest rate cuts.
Powell spoke in a panel discussion at a European Central Bank event in Portugal and said that the labor market — a major inflation driver — was showing signs of easing with wage increases moving back towards sustainable levels.
Powell said the Fed has also made progress in reducing the pace of price gains down to 2% although he added that more evidence was required to determine if the downward trend was sustainable.
Powell added that inflation in the services sector, which makes up a major part of the economy in America, is normally stickier.
U.S. stocks trimmed some earlier losses as Powell spoke, while 10-year U.S. Treasury yields dropped.
Powell’s comments were a precursor to Wednesday’s publication of minutes from the Fed’s June policy meeting when the central bank indicated that it expected to cut borrowing costs only once this year.
According to CME Group’s FedWatch Tool, traders are still expecting the Fed will implement two cuts this year starting in Sept.
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