Fed’s Powell flags careful, patient approach after rate cut
The
Fed Chair
Powell said the Fed will continue assessing data to determine the "pace and destination" of interest rates as officials reset currently tight monetary policy to account for inflation that has slowed markedly in the past year and is nearing the
But as the new administration's proposals take shape, the Fed chief said the central bank would begin estimating the impact on its twin goals of stable inflation and maximum employment.
"It's a process that takes some time," said Powell, who spoke in a press conference following the Fed's decision to reduce its benchmark overnight interest rate to the 4.50%-4.75% range. "It's all of the policy changes that are happening. What's the net effect? The overall effect on the economy at a given time? That's a process … we go through all the time with every administration."
The first years of President
Inflation has since fallen and Fed policy rates are coming down as well, a process Powell said is still expected to lead over time to a more neutral rate of interest that neither stimulates nor restrains the economy.
Yet the exact destination remains unknown, and may become even harder to pin down if fiscal and tax policies change as rapidly as Trump has pledged, particularly given the political tailwind of Republican control of the
Powell, who was appointed by Trump and then eventually clashed with him during the Republican president's first term, will now oversee monetary policy during those first critical months of the new administration.
Trump indicated over the summer, and a
"Not permitted under the law," Powell said.
‘Very good place'
For now, at least, both inflation and interest rates are moving lower in line with a Fed outlook that sees price pressures continuing to ease amid ongoing economic growth and a job market the central bank says has "generally eased" but remains healthy.
"The easy cuts have been made, and maybe December won't be too contentious either," said
Powell said for now the economic outlook was solid and the Fed hoped to keep it that way.
"This further recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we move toward a more neutral stance over time," Powell said.
"We think that the economy, and we think our policies, are both in a very good place, a very good place."
The new statement also slightly altered the reference to inflation, saying that price pressures had "made progress" towards the Fed's objective, rather than the prior language that it had "made further progress."
The personal consumption expenditures price index excluding food and energy items, a key gauge of inflation, has changed little in the last three months, running at a roughly 2.6% annual rate as of September.
Powell said that the language change was not meant to signal that inflation has been sticky.
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