We just got the strongest signal yet from Federal Reserve Chairman Jerome Powell that the central bank is about to cut rates.
It probably will only be by a quarter percentage point. The things Powell said about the economy at a highly anticipated speech at a gathering of central bankers suggest he does not think that the Fed will lower rates by a lot. But a little drop is most likely coming.
The next time the Fed will have an opportunity is September 17th, at the end of its next policy-setting meeting.
Here are the main points from Powell’s remarks:
He said he’s worried about signs that the job market may be slowing. It’s hard to tell for certain, but it might be. He said it’s also possible that that’s because of the crackdown on immigration from the Trump administration – so it’s not clear how much the slowing is a sign of an already weak economy.
There are also signs inflation is getting hot again, because of all the new tariffs that the Trump administration has imposed.
The Fed’s job is to both support the labor market and keep inflation down. Right now, it can’t do both. And, Powell said he thinks prices will rise for a period of time and then stay there – not keep rising. So, that means higher inflation will likely be temporary. At least, that’s the thinking now.
So instead, Powell is leaning towards helping the job market to avoid sudden mass layoffs. You do that by cutting interest rates – at least by a little. He doesn’t think the economy needs too much assistance from the Fed right now.
We’ll find out if the rest of the Fed policymakers agree with him in mid-September.
InterArts Fresno 