WASHINGTON: The United States is set to see inflation cool further towards policymakers’ target, Federal Reserve chair Jerome Powell said Monday, with interest rates likely to come down over time too.
Powell’s comments come more than a week after the Federal Reserve slashed interest rates by half a percentage point, marking its first reduction since 2020 as inflation eased.
The move will lower the cost of borrowing for consumers and businesses, bringing some relief to households weeks before November’s presidential election – even as the Fed works independently of the US administration.
“Disinflation has been broad based, and recent data indicate further progress toward a sustained return to two percent,” Powell said, according to prepared remarks of a speech he is set to deliver at the National Association for Business Economics annual meeting in Tennessee.
“Broader economic conditions also set the table for further disinflation,” the Fed chair said.
Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation
In particular, Powell noted that prices of goods – excluding volatile food and energy categories – have fallen while supply bottlenecks have eased.
With the growth rate in rents charged to new tenants remaining low, he added, housing services inflation will likely continue to decline.
Meanwhile, the Fed has “made a good deal of progress” when it comes to bringing price increases down without a painful spike in unemployment, he said.
He also signaled that further rate cuts are in the pipes, if there are no major surprises.
“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance,” Powell said.
But he stressed that policymakers are not on a “preset course” and will assess incoming data as they mull the prospects of further cuts.
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