December 4, 2023

New Delhi, India

U.S Federal Reserve

Federal Reserve Chair Jerome Powell affirmed the central bank’s cautious stance on interest rates and provided insights into the state of the US economy.

Interest Rates and Inflation

Powell highlighted that the benchmark overnight interest rate is already in restrictive territory, signaling a deliberate slowing of the economy. Despite inflation averaging 2.5%, close to the Fed’s 2% target, Powell noted the potential impacts of the cumulative 5.25 percentage points of rate hikes.

Balancing Risks

Acknowledging the risks associated with both slowing the economy excessively and not controlling inflation, Powell mentioned that the Federal Reserve aims for a balanced approach to navigate these challenges.

Soft Landing and Economic Outlook

Powell expressed confidence that the hoped-for “soft landing” of the economy is underway. He anticipates a slowdown in spending and output over the next year, but the job market remains strong, and price pressures are easing.

Ongoing Inflation Fight

Despite inflation rising by 3.0% annually, Powell cautioned that it’s premature to declare victory in the inflation fight. The Fed stands ready to tighten policy further if necessary.

Economic Indicators

Highlighting key economic indicators, Powell noted a slowing but sustainable pace of job creation, gradually adjusting wage growth, and real wages growing as inflation declines.

Conclusion

In conclusion, Powell’s remarks reflect the Federal Reserve’s careful monitoring of economic data and a commitment to adjust policies as needed, maintaining a delicate balance between controlling inflation and supporting economic growth.