Speaking at the annual economic policy symposium in Jackson Hole, the Federal Reserve chair Jerome Powell said that he believes that the time has come for policy to adjust.
The official noted that inflation in the U.S. has declined significantly and the conditions in the domestic labour market are now less tight than those that prevailed before the COVID pandemic in 2019. "Our restrictive monetary policy helped restore balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remained well anchored," he added.
The official also admitted that his confidence has grown that inflation is on a sustainable path back to 2%, as well as, heightened that the policymakers do not seek or welcome further cooling in labour market conditions.
In addition, the Fed's chief noted that the upside risks to inflation have diminished and the downside risks to employment have increased. "The time has come for policy to adjust," Powell concluded. "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."
He also assured that the Fed's policymakers will do everything they can to support a strong labour market as they make further progress toward price stability. "With an appropriate dialling back of policy restraint, there is good reason to think that the economy will get back to 2 per cent inflation while maintaining a strong labour market," the Fed's boss stressed.
In addition, Powell said that the current level of the Fed's policy rate gives it ample room to respond to any risks it may face, including the risk of unwelcome further weakening in labour market conditions.