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Jerome Powell Gets Ready to Cut Interest Rates
At a Jackson Hole summit, Powell signaled it would soon be time to cut rates.
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The time has come for rate cuts, according to Federal Reserve Chair Jerome Powell.
What’s the Scoop?
- Dovish Developments: Markets rallied as Powell took the stage at Federal Reserve’s Jackson Hole Policy Symposium this morning, proclaiming that “the worst of the pandemic-related economic distortions are fading, inflation has declined significantly, [and] the labor market is no longer overheated.”
- Powell Pivot: Although the Fed has previously been focused on reining in inflation as part of its dual mandate, Chair Powell announced that “the balance of risks has changed” as the upside risks to inflation have diminished while the downside risks to employment have increased.
- Employment in Focus: Powell indicated he does not welcome a cooling labor market and will do everything possible to maintain its strength to prevent it, but maintained that rising unemployment was due to slowing hiring and increasing labor supply instead of outright layoffs, a welcomed development that does not appear to impose immediate downside economic risks.
- New Paradigm: For Powell, the future direction for rates is clear and the time has come to adjust monetary policy; he remains optimistic that an appropriate dialing back of policy restraint will enable the economy to get back to 2% inflation while supporting a strong labor market.
Bankless Take:
Anticipation for Fed rate cuts enabled market participants to shrug off deteriorating economic data throughout 2024, yet not even the strongest confirmation to date for their arrival could prompt the S&P 500 to achieve the 1.15% gain needed to break all-time highs.