During his testimony before the U.S. Senate Banking Committee on Tuesday, Federal Reserve Chair Jerome Powell indicated that the central bank may soon decide to lower the federal funds rate. The Fed has maintained this key interest rate between 5.25% and 5.5% since July’s meeting of the Federal Open Market Committee.
In his prepared remarks, Powell referenced the Fed’s goal of achieving 2% inflation and stated that recent data does not support confidence in reaching this target for Q1 of this year. However, he also noted some progress towards inflation goals in more recent readings and expressed a desire for further positive data to strengthen their confidence.
Powell also acknowledged potential risks associated with maintaining higher rates for an extended period of time, stating “Elevated inflation is not our only concern.” He emphasized that delaying or minimizing policy changes could negatively impact economic activity and employment.
According to Reuters’ report following Powell’s comments, investors are now predicting a nearly 70% chance of a Fed rate cut in September as he appears to be setting up for such action. Brian Jacobsen from Annex Wealth Management commented on these developments saying “He seems to be laying out plans for a future rate cut… they see risks in waiting too long.”
