Federal Reserve chair Jerome Powell confirmed on Friday what everyone had been predicting for a while now: interest rate cuts are coming sooner rather than later.
In a highly-anticipated speech at the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming, Powell stated that “the time has come” for the Fed to change its monetary policy.
“The time has come for policy to adjust,” Powell said. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Powell also acknowledged that the U.S. labor market has been softening in a worrying manner. The July jobs report showed that the unemployment rate in the country reached 4.3%, marking the highest point in almost three years, while only 114,000 jobs were added compared to the 175,000 new jobs that economists expected.
“We do not seek or welcome further cooling in labor market conditions,” he stated while adding that he is increasingly confident that inflation will come down to the Fed’s preferred rate of 2%.
Fed will have its next meeting in September and is overwhelmingly expected to lower the benchmark rate from its current level of 5.5%. However, it remains unclear how drastic the cut will be and whether more cuts will come by the end of the year.