In a largely positive speech at Jackson Hole, Wyoming, Powell said that the economy is growing at a “solid pace”.
Federal Reserve Chair Jerome Powell addressed the Federal Reserve Bank of Kansas City’s annual international conference and spoke to the topic of “reassessing the effectiveness and transmission of monetary policy.”
Powell’s speech comes off the heals of the Democratic National Convention, which pocketbooked issues like inflation and wage growth.
Stock futures rose Friday morning ahead of the speech, with Dow Jones Industrial Average gaining 84 points (0.2%), those on the S&P 500 were up 0.4% and the Nasdaq 100 futures rose 0.6% in premarket trading. Asian shares were mixed in muted trading Friday, although Japan’s benchmark Nikkei 225 rose 0.4%.
Economists note forthcoming data, especially the monthly jobs report on September. 6 will determine the size of further cuts beyond next month’s meeting.
Here are five takeaways from his speech.1. Interest rates look set to fall
Powell suggested that “the time has come” to reduce interest rates, in a boost for home buyers.
Apparently opening the door to future rate cuts, he said: “We are attentive to the risks at both sides of our dual mandate. The time has come for policy to adjust.”
The Federal Open Market Committee’s benchmark interest rate is currently in the 5.25%-5.50% range, a 23-year high.
Powell did not specify when or by how much rates may be cut.
The development comes amid an election race in which Democrats have battled to convince voters that the economy is in good hands – at a time when many Americans do not feel better off.2. Pandemic toll
For much of the past three years, inflation ran “well above” the 2% goal. Prior to the pandemic, Powell said most Americans had not experienced “the pain of high inflation for a sustained period.” This brought on a “substantial hardship” around issues of food, housing and transportation.
“High inflation triggered stress and a sense of unfairness that lingers today”, Powell said.
The arrival of the Covid-19 pandemic quickly shut down economies across the globe. This lead to uncertainty and risks.
