Jerome Powell Says the ‘Time Has Come’ for the Fed Begin Reducing Interest Rates
With inflation nearly defeated and the job market cooling, the Federal Reserve is prepared to start cutting its key interest rate from its current 23-year high, Chair Jerome Powell said Friday.
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NewsTranscript
00:00Overall, the economy continues to grow at a solid pace,
00:03but the inflation and labor market data show an evolving situation.
00:08The upside risks to inflation have diminished,
00:11and the downside risks to employment have increased.
00:14As we highlighted in our last FOMC statement, we are attentive to the risks
00:19to both sides of our dual mandate.
00:21The time has come for policy to adjust.
00:26The direction of travel is clear, and the timing and pace
00:29of rate cuts will depend on incoming data,
00:32the evolving outlook, and the balance of risks.
00:36We will do everything we can to support a strong labor market
00:39as we make further progress toward price stability.
00:43With an appropriate dialing back of policy restraint, there is good reason
00:46to think that the economy will get back
00:48to 2% inflation while maintaining a strong labor market.
00:52Four and a half years after COVID-19's arrival,
00:56the worst of the pandemic-related economic distortions are fading.
01:00Inflation has declined significantly.
01:03The labor market is no longer overheated,
01:06and conditions are now less tight than those
01:08that prevailed before the pandemic.
01:10Supply constraints have normalized, and the balance of risks
01:14to our two mandates has changed.
01:17Our objective has been to restore price stability while maintaining a strong labor
01:21market, avoiding the sharp increases in unemployment
01:24that characterized earlier disinflationary episodes
01:28when inflation expectations were less well-anchored.
01:31While the task is not complete, we have made a good deal
01:34of progress toward that outcome.
01:37Our efforts to moderate aggregate demand and the anchoring
01:40of expectations have worked together to put inflation
01:43on what increasingly appears to be a sustainable path to our 2% objective.
01:50Disinflation while preserving labor market strength is only possible
01:53with anchored inflation expectations,
01:55which reflect the public's confidence that the central bank will bring
01:58about 2% inflation over time.
02:01The cooling in labor market conditions is unmistakable.
02:05Job gains remain solid but have slowed this year.
02:09Job vacancies have fallen, and the ratio of vacancies
02:12to unemployment has returned to its pre-pandemic range.
02:16The hiring and quits rates are now below the levels that prevailed in 2018 and 19.
02:21Nominal wage gains have moderated, and all told,
02:24labor market conditions are now less tight than just before the pandemic
02:28in 2019, a year when inflation ran below 2%.
02:34It seems unlikely that the labor market will be a source
02:36of elevated inflationary pressures anytime soon.
02:41We do not seek or welcome further cooling in labor market conditions.