Federal Reserve Chair Jerome Powell emphasized the deliberate approach the US central bank will take towards adjusting interest rates, citing a notable decline in inflation. While confirming the Fed's commitment to caution regarding interest rates, Powell expressed optimism about the desired "soft landing" for the US economy.
Powell highlighted that the US monetary policy had successfully moderated economic growth as anticipated, with an overnight interest rate considered "well into restrictive territory." He acknowledged that inflation, as indicated by a key metric averaging 2.5% over the preceding six months, aligned closely with the Fed's 2% target, according to Reuters.
Addressing concerns, Powell mentioned that the Federal Reserve now sees a more balanced situation between the risks associated with excessively slowing the economy and those of insufficiently increasing interest rates to rein in inflation.
He pointed out that the complete impact of the Federal Reserve's previous 5.25 percentage points of rate hikes might not have fully manifested yet, as reported by Reuters.
"We're seeing the desired outcomes from the economy," Powell stated during an event at Spelman College in Atlanta.
Highlighting the cautious approach of the Federal Open Market Committee (FOMC), the committee responsible for the central bank's policies, Powell stressed the increasing balance between the risks of tightening too little or too much, according to the Reuters report.
Powell indicated that future decisions regarding rate hikes would be determined by incoming data. He echoed sentiments shared by various Federal Reserve Governors, asserting that it was premature to conclude the Fed's fight against inflation had concluded, especially considering a 3.0% annual increase in prices, the metric used by the central bank to set its targets. "We're ready to further adjust policy if necessary," Powell affirmed.
Furthermore, Powell's statements reflected a growing confidence that the current policy rate ranging between 5.25% and 5.50% might be sufficient to achieve the desired objectives, Reuters noted.
Powell also remarked on the encouraging signs that the envisioned "soft landing" for the economy appeared to be materializing, with the job market remaining robust despite a slowdown in spending, economic output, and easing price pressures.