In his keynote speech at the Fed's annual economic conference in Jackson Hole, Jerome Powell emphasized that inflation, after the worst price spike in four decades inflicted pain on millions of households, appears largely under control.
ADVERTISEMENTThe chairman of the US Federal Reserve, Jerome Powell, has said "the time has come" to begin cutting its key interest rate from its 23-year high.
But in a closely watched speech, Powell did not say when rate cuts would begin or how large they might be.
The Fed is widely expected to announce a modest quarter-point cut in its benchmark rate when it meets in mid-September.
"The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data. The evolving outlook in the balance of risks. We will do everything we can to support a strong labour market as we make further progress toward price stability," he said.
In his keynote speech at the Fed's annual economic conference in Jackson Hole, Wyoming, Powell emphasized that inflation, after the worst price spike in four decades inflicted pain on millions of households, appears largely under control.
"Our objective has been to restore price stability, avoiding the sharp increases in unemployment that characterized earlier disinflationary episodes when inflation expectations were less well anchored. While the task is not complete, we have made a good deal of progress toward that outcome," he said.
According to the Fed's preferred measure, inflation fell to 2.5% last month, far below its peak of 7.1% two years ago and only slightly above the central bank's 2% target level.
The Fed chair also said that rate cuts should maintain the economy's growth and sustain hiring, which slowed last month.
Continued growth could boost Vice President Kamala Harris' presidential campaign, even as most Americans say they are dissatisfied with the Biden-Harris administration's economic record, largely because average prices remain far above where they were before the coronavirus pandemic.
By cutting rates, he said, "there is good reason to think that the economy will get back to 2% inflation while maintaining a strong labour market."
A rate cut in mid-September, coming less than two months before the presidential election, could bring some unwelcome political heat on the Fed, which seeks to avoid becoming entangled in election-year politics.
Former President Donald Trump has argued that the Fed shouldn't cut rates so close to an election.
But Powell has repeatedly underscored that the central bank would make its rate decisions based purely on economic data, without regard to the political calendar.