Powell "Inflation Expected to Fall to Low 2% Range Within a Year"
"No Set Date" for Possible September Rate Cut
On Trump Attacks: "Not Bothered at All"
Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), recently reiterated a cautious stance, stating that although the economy has entered a 'disinflation' path (a slowdown in the inflation rate), more evidence is needed to gain confidence for a rate cut. He expects inflation to fall to the low-to-mid 2% range within a year. Regarding the possibility of a rate cut in September, which is attracting global financial market attention, he avoided commenting by saying, "I will not set a date."
On the 2nd (local time), Powell attended a panel discussion at the European Central Bank (ECB) Annual Forum held in Sintra, Portugal, where he stated, "We have made significant progress in bringing inflation down to our target."
He said about recent inflation indicators, "They suggest we are returning to a disinflation path," but added, "Before embarking on a more accommodative policy, we want greater confidence that inflation is moving sustainably toward the 2% target."
The core Personal Consumption Expenditures (PCE) price index, which the Fed primarily references for monetary policy, rose 2.6% year-over-year in May. This level aligns with market expectations and is a decline from the previous month's increase of 2.8%, indicating progress in disinflation.
Powell forecasted that U.S. inflation will "fall to the low-to-mid 2% range within a year," calling it "a great outcome."
However, he expressed concern that rushing rate cuts could lead to a rebound in inflation, which has recently been easing, warning against both excessive tightening and easing risks.
Powell said, "We know well that if we move too early, we could undo the good work we have done," and "If we move too late, we could unnecessarily damage economic recovery and expansion." He assessed that the Fed's two mandates?full employment and price stability?have "returned to a much more balanced state."
When asked about the possibility of a rate cut in September, he replied, "I will not specify a concrete date here today."
Earlier, the Fed reduced its forecast for the number of rate cuts this year from three to one at last month's Federal Open Market Committee (FOMC) meeting. The minutes of the June FOMC, to be released the following day, are expected to reveal the Fed officials' views on the future rate path. Currently, the market expects one to two rate cuts within the year. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on that day priced in a 69% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting. The probability of a 0.25 percentage point or larger cut in November is 79.7%.
Additionally, Powell responded to a question about concerns over the central bank's independence being threatened, citing former President Donald Trump's mention of his dismissal if re-elected, by saying, "I am not focusing on that at all," and "What I worry about is whether I am doing my job properly."
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