Central bank chairman warns path to a reduction in inflation will be ‘bumpy’
Jerome Powell backed a gradual approach to lowering interest rates, saying the US central bank does not need to be “in a hurry” during a strong economy and a “bumpy” path down for inflation.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Mr Powell said in prepared speech in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”In government bond markets, the two-year treasury yield – which closely tracks interest rate expectations – jumped following Powell’s remarks, trading 0.08 percentage points higher at 4.36 per cent by the late afternoon in New York.
The Fed’s challenge is to take its foot off the economic brakes quickly enough to prevent any significant increase in joblessness, but also slow it enough to ensure inflation is kept at bay. The latest consumer price index report released on Wednesday underscored how uneven the path down to the Fed’s 2 per cent is likely to continue to be. Mr Powell on Thursday described it as “more of an upward bump than we had expected”, even as he said overall downward trend was “still intact”.
He suggested the central bank would consider slowing the pace of cuts further if warranted by the data, echoing comments earlier on Thursday from Adriana Kugler, a Fed governor.
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