Fed Chairman Powell hints at cautious rate cuts amidst inflation battle

Jerome Powell, the Fed Chairman, assessed the state of the American economy during a hearing before Congress. Analysts at PKO BP Bank described his speech in a report. "Over the last two years, the economy has made significant progress towards the inflation target of 2%, and labour market conditions have cooled, although they remain good," Jerome Powell stated during his appearance. The Fed Chairman noted that the risks to achieving employment and inflation goals are currently balanced.

Powell emphasized that inflation remains above the long-term target, but after stalling at the beginning of the year, the latest monthly data showed moderate progress. "More good data would strengthen our confidence that inflation is moving sustainably towards 2 per cent," PKO BP Bank analysts indicated in the report, interpreting Powell's words.

Jerome Powell noted that elevated inflation is not the only threat facing the Fed. He emphasized that the Committee would continue to make decisions on a "meeting-by-meeting" basis. The Federal Reserve Chairman pointed out the balanced consideration of risk factors for potential decisions on interest rates.

Powell warned that too early or too large a monetary policy easing could stall or even reverse progress on inflation; yet at the same time, too late or too little easing could excessively weaken economic activity and employment. Additionally, he assured us that an interest rate hike would be unlikely, as PKO BP Bank analysts indicated in the report.

Jerome Powell indicated during his speech that he would not give any hints regarding the timing of future Federal Reserve actions. PKO BP Bank analysts believe that "the balanced speech by J. Powell leaves the door open for a rate cut in September, provided upcoming inflation data continue to show a slow decline."

Experts emphasize that the Federal Reserve's current stance indicates a cautious approach to monetary policy, considering inflationary risks and the need to maintain stable economic growth and good labor market conditions.