Federal Reserve Chair Jerome Powell on Monday said the U.S. economy is in “solid shape” and that more interest rate cuts can continue if the economy continues to evolve as expected.
During comments before the National Association for Business Economics in Nashville, Tennessee, Powell characterized the economy and hiring as healthy while noting that the Fed is “recalibrating” its key interest rate, which is currently at about 4.8 percent.
He said the rate is headed “to a more neutral stance” where a level neither boosts nor holds back the economy. Fed officials have said the “neutral rate” is at about 3 percent, which is below the current level.
“Overall, the economy is in solid shape,” Powell said in prepared remarks. “We intend to use our tools to keep it there.”
U.S. Federal Reserve Chair Jerome Powell holds a press conference in Washington, DC, on September 18, 2024. On Monday, Powell said interest rate cuts can continue if the U.S. economy continues to evolve as expected.
Photo by MANDEL NGAN/AFP via Getty Images
On Friday, the government reported that inflation fell to 2.2 percent in August. Meanwhile, the unemployment rate dropped to 4.2 percent last month from 4.3 percent. However, this is still up from the decades-low of 3.4 percent the unemployment rate hit last year, and hiring has also slowed in recent months.
Powell emphasized that any future moves by the Fed will be made after evaluating available data.
“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course,” Powell said. “The risks are two-sided, and we will continue to make our decisions meeting by meeting.”
Earlier this month, the Fed cut its benchmark interest rate by a half-point, which came after two years of high rates that were designed to fight inflation but made borrowing expensive for many Americans.
Speaking of the half-point rate cut, Powell said the decision “reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate economic growth and inflation moving sustainably down to 2 percent.”
The Associated Press reported that during its September 18 meeting, Fed officials indicated they may move toward making two more quarter-point rate cuts at meetings in November or December.
CNBC reported that Powell said during a Q&A after his speech that “this is not a committee that feels like it’s in a hurry to cut rates quickly.”
“If the economy performs as expected, that would mean to more rate cuts this year, a total of 50 [basis points] more,” he added, per CNBC.
This article includes reporting from The Associated Press.
Update 09/30/24 2:59 p.m. ET: This story has been updated to include more information.