WASHINGTON (AP) — Chair Jerome Powell said Monday that the Federal Reserve is becoming more convinced that inflation is headed back to its 2% target and said the Fed would cut rates before the pace of price increases actually reached that point.

“We've had three better readings, and if you average them, that's a pretty good pace," Powell said of inflation in a question-and-answer question at the Economic Club of Washington. Those figures, he said, “do add to confidence” that inflation is slowing sustainably.

Powell declined to provide any hints of when the first rate cut would occur. But most economists and investors expect the central bank to begin cutting its key rate in September from its 23-year high, though a few now envision a rate cut as early as the Fed's next meeting later this month. The futures markets expect additional rate cuts in November and December.

“Today," Powell said, “I'm not going to send any signals on any particular meeting.”

Rate reductions by the Fed would, over time, reduce consumers’ borrowing costs for things like mortgages, auto loans, and credit cards.

Last week, the government reported that consumer prices declined slightly from May to June, bringing inflation down to a year-over-year rate of 3%, from 3.3% in May. So-called “core” prices, which exclude volatile energy and food costs and often provide a better read of where inflation is likely headed, climbed 3.3% from a year earlier, below 3.4% in May.

After several high inflation readings at the start of the year had raised some concerns, Fed officials said they would need to see several months of declining price readings to be confident enough that inflation was fading sustainably toward its target level. June was the third straight month in which inflation cooled on an annual basis.

After the government’s latest encouraging inflation report Thursday, Mary Daly, president of the Fed’s San Francisco branch, signaled that rate cuts were getting closer. Daly said it was “likely that some policy adjustments will be warranted,” though she didn’t suggest any specific timing or number of rate reductions.

But in a call with reporters, Daly struck an upbeat tone, saying that June’s consumer price report showed that “we’ve got that kind of gradual reduction in inflation that we’ve been watching for and looking for, which ... is actually increasing confidence that we are on path to 2% inflation.”

Many drivers of price acceleration are slowing, solidifying the Fed’s confidence that inflation is being fully tamed after having steadily eased from a four-decade peak in 2022.

Thursday’s inflation report reflected a long-anticipated decline in rental and housing costs. Those costs had jumped in the aftermath of the pandemic as many Americans moved in search of more spacious living space to work from home.

Hiring and job openings are also cooling, thereby reducing the need for many businesses to ramp up pay in order to fill jobs. Sharply higher wages can drive up inflation if companies respond by raising prices to cover their higher labor costs.

Last week before a Senate committee, Powell noted that the job market had “cooled considerably,” and was not “a source of broad inflationary pressures for the economy.”

Share:
More In Markets
Average rate on a 30-year mortgage slips to 10-month low
The average rate on a 30-year U.S. mortgage slipped this week to its lowest level in 10 months, but remains close to where it’s been in recent weeks. The long-term rate eased to 6.56% from 6.58% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.35%. Elevated mortgage rates have kept the U.S. housing market in a slump since early 2022, when rates began climbing from pandemic lows. The recent downward trend bodes well for prospective homebuyers who have been held back by stubbornly high home financing costs, but it has yet to spur a turnaround for home sales.
August consumer confidence dips in US: jobs, tariffs and high prices
Americans’ view of the U.S. economy declined modestly in August as anxiety over a weakening job market grew for the eighth straight month. The Conference Board said Tuesday that its consumer confidence index ticked down by1.3 points to 97.4 in August, down from July’s 98.7, but in the same narrow range of the past three months. A measure of Americans’ short-term expectations for their income, business conditions and the job market fell by 1.2 points to 74.8, remaining significantly below 80, the marker that can signal a recession ahead. Consumers’ assessments of their current economic situation also fell modestly, to 131.2 in August from 132.8 in July.
A US tariff exemption for small orders ends Friday. It’s a big deal.
Low-value imports are losing their duty-free status in the U.S. this week as part of President Donald Trump's agenda for making the nation less dependent on foreign goods. A widely used customs exemption for international shipments worth $800 or less is set to end starting on Friday. Trump already ended the “de minimis” rule for inexpensive items sent from China and Hong Kong, but having to pay import taxes on small parcels from everywhere else likely will be a big change for some small businesses and online shoppers. Purchases that previously entered the U.S. without needing to clear customs will be subject to the origin country’s tariff rate, which can range from 10% to 50%.
Load More