Recent statements by Federal Reserve officials indicated that an interest rate cut in September, as hinted by Federal Reserve Chairman Jerome Powell during his speech at the Jackson Hole conference last Friday, may be on the horizon, although he did not specify the extent of these cuts.
In his keynote address at the Federal Reserve’s annual meeting in Jackson Hole, Wyoming, Powell said, “The time has come to adjust policy. The direction is clear, and the timing and pace of rate cuts will depend on incoming data, evolving expectations, and the balance of risks.”
Powell acknowledged the progress made in reducing inflation and noted that the Federal Reserve can now focus more on maintaining full employment, the other side of its dual mandate.
Powell said, “Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than they were before the pandemic.”
This speech comes as the inflation rate gradually returns to the Federal Reserve’s 2% target. The preferred measure of inflation recently stood at 2.5%, down from 3.2% a year ago and a peak exceeding 7% in June 2022.
At the same time, the unemployment rate has risen to 4.3%, which typically signals a recession, although Powell attributed this increase to more people entering the workforce and a slowdown in hiring, rather than widespread layoffs or a weak job market.
