As the Fed holds interest rates steady, Powell says “it’s a difficult balancing act”
As the Fed holds interest rates steady, Powell says “it’s a difficult balancing act”
On Thursday morning, we’re scheduled to get the latest initial jobless claims. The Federal Reserve is keeping a close eye on the job market.
Fed Chair Jerome Powell did not announce an interest rate cut at Wednesday’s press conference, but he did say the Fed doesn’t want to keep rates high for too long and cause more people to lose their jobs.
It won’t be appropriate to cut interest rates, Powell argued, until officials are more confident that inflation is moving sustainably toward the Federal Reserve’s 2% goal. But some ex-Fed officials — like the former president of the New York Fed — think the central bank is risking a recession by keeping rates high.
Powell said it’s a delicate balancing act: If the Fed lowers rates too soon it could reignite inflation.
“So I think it’s a difficult judgment to make, and what you see as the judgment of the committee is that that time is drawing near. That time could be in September, if the data support that,” he said.
As it weighs a September rate cut, Powell said the Fed is ready to respond if the economy wobbles or if unemployment bumps up rapidly.
“If we are to respond to weakness, we’re certainly well-equipped to do that,” he said. “But that’s not what we’re seeing. What we’re seeing is strong economic activity and a good labor market and inflation coming down.”
The Federal Reserve does have a dual mandate — battling inflation down to 2% but also maximizing employment. In its Wednesday statement, the Fed said it’s “attentive to the risks to both sides of its mandate.”
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