Federal Reserve Chair Jay Powell gave another signal Monday that the central bank is nearing the time when it can start cutting rates while emphasizing that he wants to stay in his job until his term is up in May 2026.
Powell cited a recent turnaround in inflation readings following hotter-than-expected data in the first quarter, including the release last Thursday of encouraging numbers from the Consumer Price Index for the month of June.
“We didn’t gain any additional confidence in the first quarter, but the three readings in the second quarter including the one from last week do add somewhat to confidence” inflation is moving toward the Fed’s 2% target, Powell said during an interview at the Economic Club of Washington.
The Consumer Price Index on a “core” basis — which excludes volatile food and energy prices the Fed can’t control — rose 3.3% year over year in the month of June. That was down from 3.4% in May and 3.6% in April.
The Fed gets a new June reading from its preferred inflation gauge — the “core” Personal Consumption Expenditures Index — on July 26.
“What increases that confidence,” Powell added Monday, “is more good inflation data. And lately here we have been getting some of that.”
The comments about inflation built on guidance Powell provided last week before Congress, when he told US lawmakers that inflation numbers “have shown some modest further progress” and that “more good data would strengthen our confidence that inflation is moving sustainably toward 2%.”
Powell also re-emphasized Monday a point he made to lawmakers: That the Fed is now looking at both sides of its mandate — stable prices and maximum employment — as the job market cools.
That is another sign to Fed watchers that policy makers are getting closer to making cuts. Powell stressed Monday that if saw an unexpected weakening in the job market the Fed would take action.
Market watchers are now betting that rates will come down at the Fed’s Sept. 17-18 meeting, which is less than seven weeks before Election Day.
The Fed also meets at the end of this month, and some market watchers believe a cut could be in play at that meeting if other pieces fall into place between now and then.
Powell wouldn’t tip his hand on timing Monday, reiterating a stance he took before Congress.
“I’m not going to be sending signals on any particular meeting,” he said. “We are going to make these decisions meeting by meeting and the evolving data and the balance of risks.”
Powell will be under a lot of political scrutiny in the coming months. Lawmakers signaled last week that they would criticize the central bank if this key September decision doesn’t go their way.
If Powell and his colleagues choose to keep rates at a 23-year high, a growing chorus of Democratic critics calling for cuts may reach a crescendo.
But if policymakers do indeed cut, Republicans from Donald Trump on down will be sure to cast the move as caving to election-year pressure.
Powell was asked Monday if he intended to stay through the end of his term, in 2026, and he gave a one-word answer: “yes.”
When asked if he would stay longer should he be re-appointed, he said “I have nothing on that for you today.”
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