Federal Reserve Chair Jerome Powell, during his 18 September 2024 press conference, emphasized the Fed’s commitment to achieving its dual mandate of maximum employment and stable prices. Powell highlighted the significant progress the U.S. economy has made, particularly in reducing inflation, which has dropped from a peak of 7% to an estimated 2.2% as of August 2024. This drop in inflation enabled the Federal Open Market Committee (FOMC) to cut the policy interest rate by half a percentage point. Powell stressed that this rate cut aligns with the Fed’s long-term goal of sustainably bringing inflation down to 2% while preserving strength in the labor market.

Powell addressed the overall economic outlook, pointing out that economic activity in the U.S. continues to expand at a solid pace. He mentioned that U.S. gross domestic product (GDP) grew at an annual rate of 2.2% in the first half of the year, and he expects this rate of growth to continue. He attributed this growth to resilient consumer spending and renewed investment in sectors like equipment and intangibles. Powell noted that the labor market remains strong, with the unemployment rate at 3.8% as of August. He described job growth as solid, though it has slowed from the robust pace seen earlier in the year, reflecting a healthy rebalancing between labor supply and demand.

During the press conference, Powell acknowledged the economic challenges posed by higher interest rates and their impact on businesses and consumers. He pointed out that tighter financial conditions have affected interest-sensitive sectors like housing and business investment, with the housing market slowing down significantly. However, Powell reiterated the need for the Fed to balance its policies to ensure inflation remains low while minimizing adverse effects on economic growth.

Powell also provided insights into the FOMC’s thinking on future monetary policy. He noted that while the Fed had made progress in taming inflation, uncertainties remain. The Fed is carefully monitoring economic data and remains prepared to adjust monetary policy if necessary. Powell stressed that future rate cuts would be data-dependent, and the FOMC would continue to evaluate factors such as inflation expectations, wage growth, and overall economic performance.

One of the more pressing issues Powell addressed was the impact of global developments on the U.S. economy. He cited concerns about geopolitical tensions and disruptions in global supply chains, which continue to exert pressure on inflation and economic growth. Powell noted that these external factors add complexity to the Fed’s decision-making process, especially as it seeks to manage domestic inflationary pressures while being mindful of global risks.

Powell also spoke about the Fed’s approach to financial stability, emphasizing that the central bank remains vigilant in monitoring potential risks in the financial system. He acknowledged that higher interest rates have increased the risk of financial stress for some institutions, but he reassured that the banking sector remains resilient. Powell mentioned that the Fed continues to collaborate with other regulatory agencies to ensure that the financial system can withstand potential shocks.

During the Q&A session, Powell was asked about the possibility of a recession. He responded that while the Fed is aware of the risks posed by slower growth and tighter financial conditions, its primary focus remains on achieving its inflation target without triggering a recession. Powell noted that the Fed is closely watching for signs of slowing demand but remains confident that a soft landing—where inflation is tamed without significant job losses—is still achievable.