US Federal Reserve Chair Jerome Powell told lawmakers Tuesday that the job market has cooled considerably and is no longer “overheated,” adding that more “good data” would strengthen the case for an interest rate cut in the next few months.
Powell’s comments suggest “a September interest rate cut remains very much in play,” noted Capital Economics.
The Fed’s dual mandate of ensuring price stability and maximum employment is in better balance today, Powell said. Job creation has continued apace, but the unemployment rate has climbed in recent months. It reached 4.1% in June, remaining near a historical low.
From Barron’s:
Federal Reserve Chair Jerome Powell is watching for signs of continued slowing in inflation to guide his next decision on interest rates but he is also ready to respond to a faster-than-expected deterioration in the U.S. labor market.
The Fed’s dual mandate of ensuring price stability and maximum employment is in better balance today, Powell said. Job creation has continued apace, but the unemployment rate has climbed in recent months. It reached 4.1% in June, remaining near a historical low.
From Reuters:
The job market has cooled from its pandemic-era extremes and in many ways is back where it was before the health crisis, suggesting the case for interest rate cuts is becoming stronger.
“We are well aware that we now face two-sided risks,” and can no longer focus solely on inflation, Powell told the Senate Banking Committee on Tuesday. “The labor market appears to be fully back in balance.”
Powell said he did not want to send signals regarding any timing of future interest rate cuts, but comments from Democrats and Republicans both seemed to signal the political impact of any Fed cuts before the November 5 election.
Democrats asked about the risks to the job market of not cutting rates soon, while Sen. Kevin Cramer, Republican of North Dakota said, “Any move to lower rates before Nov. 5 would be a bad perception.”