Federal Reserve Chair Jay Powell gave another signal on Monday that the central bank is getting closer to when it can start cutting interest rates while emphasizing that he wants to stay on until his term ends in May 2026.
Powell pointed to the recent shift in inflation readings after hotter-than-expected data in the first quarter, including encouraging numbers last Thursday from the consumer price index for June.
“We didn’t gain any additional confidence in the first quarter, but the three readings in the second quarter, including last week’s reading, add somewhat to the confidence” that inflation is moving toward the Fed’s 2% target, Powell said. During the interview At the Economic Club of Washington.
The “core” CPI — which excludes volatile food and energy prices that the Fed can’t control — rose 3.3% on a year-over-year basis in June. That’s down from 3.4% in May and 3.6% in April.
The Fed gets a fresh June reading from its favorite inflation gauge — the “core” personal consumption expenditures index — on July 26.
“What adds to that confidence is more good inflation data,” Powell added on Monday. “We’ve had some of that recently.”
Read more: Consumers get a break as inflation in everyday spending continues to slow
The comments on inflation built on the guidance Powell gave to Congress last week when he told U.S. lawmakers that inflation numbers “have shown some modest progress” and that “further good data should bolster our confidence that inflation is moving sustainably toward 2 percent.”
Powell also reiterated on Monday the point he made to lawmakers that the Fed is now looking at both sides of its mandate — stable prices and maximum employment — as the labor market slows.
It’s another sign to Fed watchers that policymakers are getting closer to making cuts. Powell stressed Monday that if the Fed sees unexpected weakness in the labor market, it will take action.
Market watchers are now betting that interest rates will be cut at the Fed’s September 17-18 meeting, less than seven weeks before Election Day.
The Federal Reserve also meets later this month, and some market watchers believe a cut could be on the cards if further steps are taken between now and then.
Powell did not overstate the timing on Monday, reiterating the position he took before Congress.
“I’m not going to send signals about any particular meeting,” he said. “We’ll make those decisions meeting by meeting, evolving data and weighing the risks.”
Read more: What the Fed’s Interest Rate Decision Means for Bank Accounts, CDs, Loans and Credit Cards
Powell will be under intense political scrutiny in the coming months. Lawmakers signaled last week that they would criticize the central bank if a key decision in September doesn’t go their way.
If Powell and his colleagues choose to keep interest rates at their highest levels in 23 years, a growing chorus of Democratic critics calling for cuts could reach a crescendo.
But if policymakers do cut spending, Republicans from Donald Trump on down will surely see the move as a capitulation to election-year pressure.
Asked on Monday if he intended to stay on until the end of his term in 2026, Powell replied with one word: “Yes.”
Asked if he would stay longer if reappointed, he said: “I don’t have anything for you today.”
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