MENA Newswire News Desk: Federal Reserve Chair Jerome Powell reiterated Monday that the central bank will take necessary measures to maintain the economy’s strength, although future interest rate cuts will likely come in smaller increments. Speaking during a Q&A session following a speech in Nashville, Powell emphasized the Fed’s measured approach to rate reductions. c”This is not a committee that wants to cut rates quickly,” Powell explained, referencing the Federal Open Market Committee (FOMC), which oversees monetary policy decisions. While the Fed remains cautious, Powell did leave room for quicker action if economic conditions worsen. “We will do what it takes in terms of the speed with which we move,” he added.
Powell’s remarks came nearly two weeks after the central bank reduced its benchmark interest rate by 50 basis points during its September 18 policy meeting – the first such cut in more than four years. The Fed’s move was aimed at maintaining economic momentum amid signs of a slowdown. At that meeting, Fed officials signaled their intention for two more 25 basis point cuts in 2024. Powell reiterated this outlook on Monday, noting that while more reductions are likely, policymakers do not anticipate further large cuts. “That wouldn’t mean more fifties,” he clarified, alluding to the September cut’s magnitude and the preference for smaller adjustments moving forward.
The Federal Reserve’s decision to lower rates by 50 basis points, instead of the widely expected 25, stemmed from confidence that both the labor market and broader economy could remain resilient, even as inflation eases. Powell highlighted that inflation has continued its downward trajectory and is now broadly aligned with the Fed’s long-term goal of 2%. “We’ve made substantial progress toward that outcome,” Powell said, noting that recent data supports the Fed’s optimism regarding inflation. However, he cautioned that the central bank does not require further cooling in the job market to achieve its inflation target. The Fed’s current focus remains on ensuring the job market remains stable.
Despite some softening, Powell characterized the job market as “solid,” citing low layoffs, an unemployment rate within the full employment range, and high labor force participation among prime-age workers (those aged 25 to 54). However, Powell indicated that if this Friday’s jobs report shows signs of faster weakening, the Fed may consider deeper rate cuts at its upcoming November meeting. “Overall, the economy is in solid shape,” Powell asserted.
“We intend to use our tools to keep it there.” He suggested that if economic conditions unfold as anticipated, the Fed will continue reducing rates incrementally toward a more neutral stance over time. In a related statement, Atlanta Federal Reserve President Raphael Bostic told Reuters he would be open to another 50 basis point rate cut at the November meeting if job growth data continues to weaken. Bostic, who had previously supported only a 25 basis point cut, acknowledged the possibility of more aggressive measures if warranted by the economic outlook.