Federal Reserve Chair Jerome Powell said the central bank will lower interest rates “over time,” while again emphasizing that the overall economy remains on solid footing.
Michael Green, chief investment strategist of Simplify Asset Management, joins BNN Bloomberg to discuss the market reaction to the Feds 50 BPS rate cut.Federal Reserve Chair Jerome Powell said the central bank will lower interest rates “over time,” while again emphasizing that the overall US economy remains on solid footing.
A neutral policy is one that neither stimulates nor holds back the economy. The Fed’s current benchmark rate, which officials lowered to a range of 4.75%-5% earlier this month, is widely regarded as still restricting economic activity. “This is not a committee that feels like it’s in a hurry to cut rates quickly,” Powell said. “Ultimately we will be guided by the incoming data. And if the economy slows more than we expect, then we can cut faster. If it slows less than we expect, we can cut slower.”
“We do not believe that we need to see further cooling in labor market conditions to achieve 2% inflation,” he said.Inflation has been tame in recent months, a trend reinforced by government data released last week showing the Fed’s preferred gauge of price pressures rose modestly in August. On a 12-month basis, the personal consumption expenditures price index climbed 2.2%.
Still, some policymakers are wary of cutting rates too quickly and potentially reigniting inflationary pressures in the economy.
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