Feds Jerome Powell hints at more rate cuts as inflation slows but warns of two-sided risks

The US economy seems poised for a continued slowdown in inflation that will allow the Federal Reserve to cut its benchmark interest rate and “over time” reach a level that is no longer holding back activity, Fed Chair Jerome Powell said Monday in remarks that showed no obvious lean towards a faster or slower pace of rate reductions.“Disinflation has been broad-based, and recent data indicate further progress toward a sustained return to 2%,” the Fed’s targeted inflation level, Powell said in remarks prepared for delivery at a National Association for Business Economics conference in Nashville, Tenn.“If the economy evolves broadly as expected, policy will move over time toward a more neutral stance,” Powell said.“But we are not on any preset course.

The risks are two-sided, and we will continue to make our decisions meeting by meeting.”In response to a question following his formal remarks, Powell said in terms of the outlook for rate cuts he saw “a process that will play out over time,” adding “this is not a Committee that feels like it’s in a hurry to cut rates quickly.”The Fed cut rates by half a percentage point at its Sept.17-18 meeting, lowering the range of its policy rate from a 20-year high of 5.25%-5.50%, which it had maintained for 14 months, to the current 4.75%-5.00% range. Economic projections released at that meeting showed the median policymaker expectation was for the rate to decline further to the 4.25%-4.50% range by the end of the year, to the 3.25%-3.50% range by the end of 2025, and for policy easing to end in 2026 with the rate around the longer-run estimated “neutral” level of 2.9%.“If the economy performs as expected, that would mean two more cuts this year, a total of 50 (basis points) more,” Powell said.

“We will do what it takes in terms of the speed with which we move.”Investors have been divided over whether the US central bank will slip into a series of quarter-percentage-point cuts n...