Federal Reserve Chairman Jerome Powell spoke publicly Tuesday for the first time since the Fed’s preferred inflation gauge showed prices rising at their slowest pace in more than three years in May.
Although still showing signs of caution, Powell admitted that the data has been moving in the right direction recently.
Yahoo Finance’s Jennifer Schonberger reports:
Powell said Tuesday he was encouraged by lower inflation, but reinforced that the central bank will need to see more evidence before cutting interest rates.
The last two inflation measures, in April and May, “suggest that we are returning to a disinflationary path,” Powell said on a panel in Portugal for a European Central Bank conference.
Powell’s comments come days after the latest reading of the Fed’s preferred inflation target – the “core” personal consumption expenditures (PCE) index – rose 2.6% in May, in line with expectations and down from 2.8% in April.
On a monthly basis, inflation rose by 0.1%, also in line with expectations and down from 0.2% in April.
The reading offered fresh support for rate cuts later this year, easing concerns that grew during the first quarter that higher-than-expected inflation could upend plans to ease monetary policy in 2024.
Despite another positive signal that inflation is easing, the central bank is unlikely to cut rates at its next meeting in late July.
Powell declined to answer a question about whether the Fed could cut rates as early as September.
Instead, he stressed that the Fed will need more time and evidence that inflation is moving sustainably toward its 2% target, noting that the central bank can afford to be patient given a strong labor market that is gradually cooling.
“We’ve made a lot of progress,” Powell said. “We just want to understand that the levels we’re seeing are a true indication of what’s really happening with core inflation.”
News Source : finance.yahoo.com
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