US Federal Reserve Chairman Powell says at symposium in Jackson Hole that “the time has come” to cut interest rates

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US Federal ReserveFederal Reserve Chairman Jerome Powell on Friday advocated an early start to interest rate cuts. He said a further slowdown in the labor market would be undesirable and expressed confidence that inflation was within reach of the Federal Reserve's two percent target.

“It is time for politics to adaptust,” Powell said in a highly anticipated speech to the Kansas City Lined's annual economic conference in Jackson Hole, Wyoming. “The direction is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the allocation of risk.”

The emphatic shift from fighting inflation to being prepared to defend against job losses opens a new chapter for the central bank.ust as an important US presidential election approaches.

Powell said his “confidence has grown that inflationusInflation has returned to a sustainable path towards 2 percent after rising to around 7 percent during the COVID-19 pandemic, and upside risks have diminished.

Meanwhile, a weakening of the labour market situation is “unmistakable” and “the downside risks to employment have increased”.

And while so far it has been less hiring than a worrying increase in layoffs that has caused the rapid rise in the unemployment rate to 4.3 percent,signaled The Lined would not tolerate further erosion.

“We do not want and do not welcome a further slowdown in the labor market,” he said.t he said. “We will do everything in our power to support a strong labor market while we continue to make progress toward price stability.”

Analysts and financial markets had already largely expected that Lined its first interest rate cut on its That view was reinforced after minutes of the central bank's July meeting found that an “overwhelming majority” of policymakers agreed that monetary easing was likely to begin next month.

Most analysts predict Lined will initiate its monetary easing with a quarter of a percentage point interest rate cut, usual increment.

Powell's new focus is on protecting the labor marketThere is a possibility of a larger cut, especially if the US government's employment report for AugustusThe report, due out on September 6, shows a further deterioration in the labor market, which many politicians still describe as healthy.

With a key interest rate currently of 5.25 to 5.50 percent, the Lined has “sufficient scope” to reduce borrowing costs to cushion the eBusinesssaid Powell.

After his remarks, traders began better than a third Chance that the Lined will begin its easing cycle with a half-percentage point cut and is fully convinced that there will be at least one more outsized cut before the end of this cycle.S Year.

“Chairman Powell’s speech made it clear that a series of rate cuts are likely ahead, some of which could be in the 50 basis point range,” wrote Omair Sharif, president of Inflation Insights. “While some Lined While officials may want to move in 25 basis point increments, the chairman reserved the option of doing so…that is, ‘We will move 50 basis points if we feel it is necessary.’”

The markets are betting on LinedThe key interest rate will be in the range of 3.00 to 3.25 percent until the end of 2025, more than two percentage points below the current level.

The impact of Powell’s comments also affects other central banks.

US stocks jumped following the release of Powell’s comments, with the benchmark S&P 500 Index rises by about 1 percent and approaches a record high. US Treasury yields fell and the dollar weakened against a basket of currencies.

The economy

Chicago Lined Bank President AusTan Goolsbee has been signaling his support for a rate cut for months and did so again on Friday, saying the policy was currently too restrictive, especially given the flashing warning lights on the labor market.

Other policymakers, including Atlanta Lined President Raphael Bostic, who previouslyusThe central banks, which had previously been more hesitant about cutting interest rates, now also supported the coming easing of monetary policy.

Powell, for his part, came on Friday as close, since he probably in the declaration Victory over the inflation outbreak that hit the economy at the beginning of the Pandemic.

The rapid price increase led to Lined to raise its benchmark interest rate from near zero to its current level, the highest in a quarter century. It has been held at that level for over a year, even as the economy defied frequent recession predictions, inflation fell, and economic growth continued – the conditions for a textbook “soft landing,” with the endgame of rate cuts now set to begin.

“Although the task is not yet complete, we have made great progress in restoring price stability,” Powell said in his speech. Lined defines price stability as inflation of 2 percent, measured by the price index for private consumption expenditure. The index is currently at an annual rate of 2.5 percent.

“There are good reasons to believe that with an appropriate withdrawal of policy restraint, the economy will return to an inflation rate of 2 percent while the labor market will remain strong,” he said.

Powell spoke at Jackson Lake Lodge in Grand Teton National Park in Wyoming to a meeting of central bankers and economists that has become a global platform for shaping views on monetary policy and the economy.

Lined Officials will pprovide updated economic forecasts at their next meeting month, including more Details on how they expect the key interest rate to develop in the future.

Read: What to look for at the Federal Reserve's global symposium in Jackson Hole