Fed ready to cut interest rates as inflation eases

Federal Reserve Chairman Jerome Powell said on Friday he was now more confident that inflation would fall to the central bank's target of 2 percent. The Fed has kept its benchmark interest rate at around 5.25 to 5.5 percent for more than a year to push inflation down to that target. The inflation rate was around 2.5 percent on Friday, Powell said. In June 2022, it was around 9.1 percent, according to a White House statement.

Powell's announcement came just days after the Labor Department revised an earlier, overly optimistic jobs count. According to the department, the government counted about 818,000 jobs that did not exist in the 12 months leading up to March 2024. But even before this week's revision, recent labor market reports showed a decline in the number of workers employers were hiring and a rise in the unemployment rate. Powell acknowledged the higher unemployment rate on Friday, but attributed it to more people entering the labor market, not more people losing their jobs.

Did Powell say when the interest rate cuts would happen? The central bank will determine the timing of interest rate cuts based on its assessment of upcoming economic data, Powell said. He expressed confidence that inflation would continue to fall even if the Fed cuts interest rates. The current interest rate also gives the Fed the flexibility to respond to changes in the economic outlook, he added.

Dig deeper: Listen to Nick Eicher and David Bahnsen’s recent conversation about The world and everything in it Podcast with an analysis of the election promises of both parties regarding the economy.