Recent inflation data ‘adds some confidence’ in Fed’s ability to cut rates: Powell

Federal Reserve Chair Jerome Powell gave another signal on Monday that the central bank is getting closer to the time when it can start cutting interest rates while emphasizing that he wants to stay on until his term ends in May 2026.

Powell cited the recent shift in inflation readings following hotter-than-expected data in the first quarter, including the release of encouraging June CPI numbers last Thursday.

“We didn’t gain any additional confidence in the first quarter, but the three readings in the second quarter, including the one from last week, add some 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 strips out volatile food and energy prices that the Fed can’t control — rose 3.3% year-over-year in June, 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. And recently we’ve started to get some of that,” Powell added on Monday.

Read more: Consumers get a break as inflation in everyday spending continues to slow

Powell’s comments on inflation built on the guidance he gave to Congress last week when he told U.S. lawmakers that inflation numbers “showed some modest additional 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 — price stability and maximum employment — as the labor market slows.

It’s another sign to Fed watchers that policymakers are moving closer to making cuts. Powell reiterated 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 Federal Reserve’s September 17-18 meeting, less than seven weeks before Election Day.

The US Federal Reserve also meets later this month, and some market watchers believe a rate cut could be on the cards if things go well between now and then.

Powell did not disclose the timing of Monday’s election, stressing the position he took before Congress.

“I will not send signals about any particular meeting. We will make these decisions meeting by meeting based on evolving data and the balance of risks,” he said.

The story continues

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 the key decision in September doesn’t go their way.

If Powell and his colleagues choose to keep interest rates at a 23-year high, a growing chorus of Democratic critics calling for lower rates could reach a crescendo.

But if policymakers do decide to cut spending, Republicans, from Donald Trump onward, are sure to 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 have nothing to say to you today about that.”

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