The U.S. Federal Reserve Chair, Jerome Powell, recently discussed the future of monetary policy, stating that it is likely to evolve into a more “neutral stance.” Speaking at an economics event in Nashville, Powell expressed his confidence in the overall strength of the economy.
He emphasized that there are equal levels of risk associated with the Fed’s objectives of reducing inflation and maintaining a strong labor market. Powell explained that the recent decision to reduce the policy rate by 50 basis points reflects the Fed’s growing confidence in the ability to maintain strength in the labor market while achieving moderate economic growth and sustainable inflation at 2 percent.
Looking ahead, Powell mentioned that if the economy continues to evolve as expected, policy will gradually move towards a more neutral stance. However, he emphasized that the Fed is not on a preset course and will continue to assess incoming data, the evolving outlook, and the balance of risks on a meeting by meeting basis. Powell reiterated that the economy is in solid shape, and the Fed intends to use its tools to maintain its current state.
In August, the Fed made its first interest rate cut since March 2020, with the US inflation rate standing at 2.5%. Powell’s remarks indicate a cautious yet optimistic approach to monetary policy, with a focus on maintaining economic stability while keeping inflation in check.
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