Investing.com — Federal Reserve Chairman Jerome Powell said Monday the Fed doesn’t expect to wait until inflation reaches the 2% target before cutting rates, and the Fed chief acknowledged that recent data inflation data has increased the Fed’s confidence that it is making progress in the battle against inflation.
“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said at the Economic Club of Washington D.C.
Waiting too long to cut rates could undermine the economic expansion, Powell added, though said that the hard landing isn’t the most likely scenario.
While Powell didn’t signal when rates could likely be lowered, he acknowledged that recent data has boosted the Fed’s confidence that inflation is on a path toward target.
“What increases that confidence in that is more good inflation data, and lately here we have been getting some of that,”
Data last week showed that the , a measure of inflation, fell for the first time in June, marking the dip for the first time in more than four years. The year over year measure of the core PCE price Index, the Fed’s preferred measure of inflation, at 2.6% remains above the Fed’s 2% target.
The yield on the , which is sensitive to Fed monetary policy, traded lower at 4.45% recently.
About 88% of traders expect a rate cut in September, up from 73% a week earlier.
