“Economy in solid condition”: Powell promises two more interest rate cuts in the USA

“Economy in solid condition”
Powell is promising two more interest rate cuts in the USA

Listen to article

This audio version was artificially generated. More info | Send feedback

The US economy is robust. The inflation rate is rising more slowly. For the US Federal Reserve, this is a development that it wants to preserve. This includes gradually lowering interest rates again.

US Federal Reserve Chairman Jerome Powell expects two more interest rate cuts by a total of 50 basis points this year. “Overall, the economy is in solid shape; we intend to use our tools to keep it that way,” he told a financial conference in Nashville, Tennessee. However, the Fed does not follow a set course. “We will make our decisions on a meeting-by-meeting basis,” said the former investment banker, who was appointed to the Fed’s board in 2012 by then-President Barack Obama.

“If the economy performs as expected, that would mean there will be two more cuts this year,” Powell said in a panel discussion. He referred to forecasts according to which most central bankers expect two cuts of 25 basis points each. The Fed’s Federal Open Market Committee meets twice more this year. “If the economy develops as expected, interest rate policy will move toward a more neutral stance over time.” The Fed’s next meeting will take place on November 6th and 7th,

The Fed recently completed the interest rate turnaround and sharply reduced the key monetary policy rate – to the new range of 4.75 to 5.00 percent. The monetary authorities have firmly set their sights on further downward steps. According to their latest interest rate outlook, monetary policy levels could fall by half a percentage point this year. After further cuts, the key interest rate is likely to end up in a range of 2.75 to 3.00 percent in 2026.

The Fed wants to pursue a course that will keep inflation in check and not stall the economy. The US monetary authorities pay particular attention to the price development of a fixed basket of goods that is tailored to consumers’ personal spending. This so-called PCE index increased by 2.2 percent in August compared to the previous year and is therefore no longer far from the Fed’s target of two percent.

According to the central bank, current indicators signal that the economy continues to grow at a “solid pace.” The monetary authorities currently assume that GDP will increase by two percent in 2024 and that this growth rate will be maintained in the coming years. The OECD is currently assuming that growth in the USA will slow, but will be cushioned by the easing of monetary policy. The industrialized nations organization assumes a GDP increase of 2.6 percent for this year and 1.6 percent for 2025.

source site-32