Current Monetary Policy "Modestly Restrictive"
Jerome Powell, Chair of the U.S. Federal Reserve (Fed), stated on July 30 (local time) that no decision has yet been made regarding the direction of the benchmark interest rate in September. He also emphasized that the inflationary effects of tariffs still need to be closely monitored.
At a press conference held after the regular meeting of the Federal Open Market Committee (FOMC) that day, Powell said regarding the possibility of a rate cut in September, "We have not made any decisions," adding, "We will make our judgment by considering all the additional information we will obtain by then."
On this day, the Fed maintained the federal funds rate at 4.25?4.5% per annum, reflecting a more cautious outlook on the economy. According to the FOMC policy statement, while the June meeting assessed that "economic activity has continued to expand at a solid pace," the statement was revised in this meeting to "recent indicators suggest that the pace of economic activity growth moderated in the first half of the year." The Fed evaluated that U.S. economic activity is moderating, but Powell did not provide any significant clues about the future path of monetary policy, including the possibility of a rate cut.
Powell described the current level of monetary policy as "modestly restrictive." He explained, "We kept the benchmark interest rate at its current level today, which can be considered modestly restrictive," and added, "The current monetary policy is not holding back the economy and appears appropriate."
Regarding the labor market, he said, "Overall, it is sound, but there are clear downside risks," diagnosing that the possibility of an economic slowdown and a rise in the unemployment rate cannot be ruled out.
On the recent progress in trade negotiations between the U.S. and major trading partners, Powell maintained a cautious stance. He noted, "There is more and more information, but there is still a lot of uncertainty," and assessed, "It seems that there will be much more to come."
Regarding the effects of tariff-induced inflation, he stated that it will need to be monitored continuously going forward.
Powell said, "The impact of tariffs has started to be reflected more clearly in the prices of some goods, but we need to see what effect it will have on overall economic activity and prices," noting that both the possibility that tariff-driven price increases will be one-off and the possibility that they will persist in the long term exist.
Powell emphasized, "The Fed's mandate is to keep long-term inflation expectations stable and to prevent one-off price increases from becoming entrenched inflation," adding, "We are in a favorable position to closely examine the evolving economic outlook and the balance of risks."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
