JULY 15, 2024 – FED SOFTENS AS INFLATION AND LABOR DATA SLIP
Fed Chair Jerome Powell spoke in front of Congress Tuesday and Wednesday last week. He said the Fed does not expect to cut interest rates until they have gained greater confidence inflation is moving sustainably towards 2 percent. Though he pointed out inflation has dropped significantly recently. Powell also noted that “elevated inflation is not the only risk we face”, indicating the labor market has cooled and is no longer a source of inflationary pressures. Powell stated, “reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
On Thursday, it was released inflation in June fell 0.1 percent from May, putting the annual rate at 3 percent, its lowest level in more than 3 years. Core CPI was up 0.1 percent monthly, or 3.3 percent annually, the smallest rise since April 2021. Following this news, markets have increased the likelihood of a September rate cut and are more hopeful for a second cut in December.
Powell emphasized every policy meeting is “live” using the latest economic data, and decisions will be made on the spot, not in advance. Powell will address markets both in July and August in the run up to the September meeting, when he can revise expectations.