Powell: "Some Confidence in Inflation Decline... Need Greater Certainty"

Indication of Interest Rate Cut Before Reaching 2% Inflation Target

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), stated that while inflation is declining, more confidence is needed that it will continue to slow down to the target rate of 2%. He also hinted that interest rate cuts would begin before inflation reaches 2%.

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On the 10th (local time), Powell appeared before the U.S. House of Representatives for the semiannual monetary policy report and said, "I have some confidence in the decline of inflation." He added, "The question is whether we have enough confidence that it will sustainably fall to 2%, and I am not yet ready to say that."

Regarding recent inflation indicators, he assessed that there has been "modest further progress." He reiterated his previous Senate remarks that "more good data" would strengthen the central bank's confidence that inflation is slowing to 2%.

He also stated that the Fed would not wait to cut interest rates until inflation fully reaches 2%, raising expectations for a September pivot (policy shift).

Powell said, "The mission regarding inflation is not over yet, and there is more work to be done," adding, "Policymakers are paying close attention despite significant easing in the labor market."

This is interpreted as meaning that, following recent inflation easing and signs of cooling in the labor market, the Fed has begun seriously weighing the timing of interest rate cuts.

He also commented on balance sheet reduction, saying, "We have made considerable progress," but "I think there is still a long way to go." Earlier, the Fed announced it would slow the pace of quantitative tightening known as balance sheet reduction.

The Fed currently maintains the benchmark interest rate at 5.25?5.5% annually for a year. This is the highest level in 23 years, resulting from 11 consecutive rate hikes since March 2022. The market expects the Fed to hold rates steady at the July Federal Open Market Committee (FOMC) meeting and begin cuts in September.

This content was produced with the assistance of AI translation services.