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09/07/24
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US Economy Not Overheated Anymore – Powell
On Tuesday, Fed Chair Jerome Powell said in remarks to Congress that the U.S. economy was no longer overheated as the job market has cooled substantially from the pandemic-era extremes and was in many ways back to where it was before Covid.
This suggests the case for interest rate cuts may be becoming stronger.
Powell bluntly stated that he would not be sending any signals about the timing of future interest rate actions. He was questioned by Republicans about the inflation pain to households as it stays above the Fed’s 2% target and by Democrats about the risk to the job market.
Analysts however still interpreted Powell’s comments at inching the door open to a rate cut in Sept.
Natixis’ chief economist for the U.S., Christopher Hodge, said Powell’s emphasis moved slightly towards a balance of risks within the Fed’s mandate. He added the Fed had to get ahead of labor market weakness. It seemed as if the foundation for a pivot in Sept. was being laid.
Although Powell’s opening remarks dealt with a review of monetary policy and the economy, questioning from senators focused on housing costs and on proposed changes in banking regulations that the Fed is considering internally.
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