Chairman of the Federal Reserve, Jerome Powell, hinted at a watchful approach towards trimming interest rates, given the strong configuration of the U.S. economy.
Powell dismissed the need for hasty decisions regarding rate cuts while speaking at a business event in Dallas. He accredited this relaxed stance to the solid position of the current economy.
He noted that the resilience of the labour market remains intact despite a drop in job growth in October, a development he mostly associates with storm disturbances in the Southeast and ongoing labour strikes. Nonfarm payrolls recorded a mere increment of 12,000 during this period.
Addressing the topic of inflation, Powell highlighted the consistent progress being made. He remarked that the Federal Reserve officials project a consistent inflation rate that’s edging closer to the central bank’s target of 2%. Nevertheless, recent data indicates a minor surge in consumer and producer prices causing a divergence from the Fed’s mandate over the 12-month period.
Despite this, Powell maintains that the central bank’s preferred measure of inflation still stands at 2.3% for October or 2.8% when food and energy are excluded. He reiterated the Fed’s commitment to reach their long-term goal of 2% inflation, even if the journey there may be punctuated with bumps.
The cautious approach from Powell regarding rate cuts influenced a drop in stocks and an ascension in Treasury yields. This sentiment resonated with traders with lowered expectations for a reduction in rates come December.
This follows on from the Federal Open Market Committee cutting the benchmark borrowing rate of the central bank by 0.25 percentage points, resulting in a range between 4.5% and 4.75%, a development which succeeded a cut of 0.5 percentage points in September.
