Heavy! Powell emphasized today that he will further cut interest rates!

The following is reported by the New York Times on September 30:

Fed Chairman Powell emphasizes further interest rate cuts

Federal Reserve Chairman Jerome Powell stressed on Monday that officials are likely to lower interest rates in the coming months as the job market slows and inflation cools significantly.

The Federal Reserve cut interest rates by 0.5 percentage points at its September 18 meeting, its first rate cut in four years. The Federal Reserve usually adjusts interest rates by 0.25 percentage points, so this rate cut is larger.

The rate cut reflects the Fed's significant progress in fighting inflation. Price increases have slowed significantly since their peak in 2022, so high interest rates since mid-2023 are no longer seen as necessary.

"Inflation is down, employment is up, and policy needs to be recalibrated to reflect our progress toward goals and changes in risks," Powell told a conference of economists in Nashville.

The question now is how the Fed will adjust policy in the coming months. Interest rates remain at about 4.8%, above what most economists consider the "neutral rate" needed for continued steady economic growth.

"Looking forward, if the economy develops as expected, policy will gradually move toward a more neutral stance, but we will not preset any course," Powell said.

High interest rates depress the economy by increasing borrowing costs, while lower interest rates act as a brake on the economy. The challenge for the Fed is to find the right balance, neither wanting to cut interest rates too quickly, triggering a surge in demand, but also not wanting to cut rates too slowly, leading to rising unemployment and an economic recession.

The Fed's goal is to achieve a so-called "soft landing," in which policy adjustments are used to control inflation at reasonable levels while avoiding a severe economic downturn.

Currently, the unemployment rate is rising significantly and inflation is close to the Fed's 2% target. Powell reiterated that the sharp rate cut in September reflected the Fed's confidence that inflation would return to sustainable levels while maintaining labor market stability.

Investors are speculating whether the Fed will cut interest rates again sharply at its next meeting in November. The Fed is likely to wait until more data is available before making a decision.