Fed Chair Indicates Interest Rate Cut Could Be Coming Soon

Jerome Powell Chair of the Federal Reserve
Fed Chair Jerome Powell

Federal Reserve Chair Jerome Powell indicated earlier this week that perhaps a cut in the Fed’s interest rates could be in the offing.

Powell, in his semi-annual testimony to the House Financial Services Committee, is not only watching inflation, but is also paying attention to the job market, which is slowing.

Economists seemed to take that as an indication the Fed may begin cutting rates soon.

“We’re not just an inflation-targeting central bank,’’ Powell told the committee. “We also have an employment mandate.”

Powell had told the Senate Banking Committee on Tuesday the Fed was making what he called “considerable progress’ toward reaching its goal of a 2% inflation rate, which had initially spiked higher than it had in some 40 years. However, he warned, cutting rates “too late or too little could unduly weaken economic activity and employment.”

“For a long time we’ve had to focus on the inflation mandate,” Powell told House members Wednesday. The Fed has focused on it since inflation reached a four-decade high coming out of the pandemic recession.

The Fed raised its benchmark rate 11 times in 2022 and 2023. Inflation has since plummeted from its 9.1% peak to 3.3%.

The U.S. economy and job market continued to grow, though it has weakened this year. From April through June, according to an Associated Press report, U.S. employers added an average 177,000 jobs a month. That’s the lowest three-month hiring pace since January 2021.

Powell told House members during his testimony Wednesday that the Fed likely wouldn’t wait until inflation reached its 2% target before it would start cutting rates.