Federal Reserve Chairman Jay Powell on Monday signaled again that the central bank is nearing the point where it can start cutting rates, stressing that he plans to stay in office until the end of his term in May 2026.
Powell cited a recent turnaround in inflation numbers after first-quarter numbers came in higher than expected, including the release of encouraging consumer price index data for June last Thursday.
“We didn’t get any extra confidence in the first quarter, but the three measurements in the second quarter, including last week, do give some confidence” that inflation is moving toward the Fed’s 2% target, Powell said in an interview at the Economic Club of Washington.
The consumer price index on a “core” basis — which excludes 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 will receive a new June reading from its favorite inflation gauge, the “core” personal consumption expenditures index, on July 26.
“What increases that confidence,” Powell added Monday, “is more good inflation data. And we’ve been getting some of that lately.”
Read more: Consumers get a breather as daily spending inflation continues to cool
The comments on inflation build on guidance Powell gave to Congress last week, when he told U.S. lawmakers that inflation numbers “have shown modest further progress” and that “more good data would strengthen our confidence that inflation is moving toward 2% on a sustained basis.”
Powell also reiterated a point he made to lawmakers on Monday that the Fed is now looking at both sides of its mandate — stable prices and maximum employment — as the labor market cools.
That’s another sign to Fed watchers that policymakers are moving closer to austerity. Powell stressed Monday that if the Fed saw an unexpected weakening in the labor market, it would take action.
Market analysts are now betting that interest rates will fall at the Fed’s meeting on September 17-18, less than seven weeks before Election Day.
The Fed also meets later this month and some market observers think a rate cut could be on the agenda at that meeting if all the pieces fall into place in the meantime.
Powell declined to provide details about the timing on Monday, but reiterated the position he took to Congress.
“I’m not going to give any signals about a specific meeting,” he said. “We’re going to make these decisions meeting by meeting and the evolving data and the balance of risks.”
Read more: What the Fed’s rate decision means for bank accounts, CDs, loans and credit cards
Powell will be under a lot of political scrutiny in the coming months. Lawmakers indicated last week that they would criticize the central bank if this key September decision did not go in their favor.
If Powell and his colleagues choose to keep interest rates at their highest level in 23 years, the growing chorus of Democratic critics calling for cuts could reach a climax.
But if policymakers do indeed cut spending, Republicans from Donald Trump on down will undoubtedly see it as a cave-in to election-year pressure.
Powell was asked Monday whether he plans to stay through the end of his term in 2026. He gave a terse answer: “Yes.”
Asked whether he would stay longer if reappointed, he replied: “I have nothing to say about that today.”
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