The S&P 500 and Nasdaq are at record highs as Powell touts an improvement in inflation

Federal Reserve Chairman Jerome Powell spoke publicly for the first time on Tuesday after the central bank’s preferred measure of inflation showed prices rose at the slowest pace in more than three years in May.

While showing signs of caution, Powell acknowledged that the data is pointing in the right direction recently.

Jennifer Schoenberger of Yahoo Finance reports:

Powell said Tuesday that he was encouraged by cooling inflation, but stressed that the Fed needs to see more evidence before cutting interest rates.

The last two inflation readings for April and May “suggest that we are back on an inflationary path,” Powell told a panel for a European Central Bank conference in Portugal.

Powell’s comments came days after the central bank’s preferred inflation target – the latest reading of the “core” personal consumption expenditures (PCE) index – rose to 2.6% in May, in line with expectations, from 2.8% in April.

On a month-on-month basis, the inflation measure rose 0.1%, and fell in line with expectations from 0.2% in April.

The reading provided fresh support for rate cuts later this year, easing concerns that grew during the first quarter that hotter-than-expected inflation could boost plans to ease monetary policy in 2024.

Despite another positive signal that inflation is easing, the central bank is unlikely to cut rates at its next meeting in late July.

Powell declined to answer a question about whether the Fed could cut rates in September.

Instead, he underscored that the central bank will need more time and evidence that inflation is moving steadily toward its 2% target, noting that the central bank can be patient given a strong labor market that is gradually cooling.

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“We’ve made a lot of progress,” Powell said. “We want to understand that the levels we’re seeing are a true reading of what’s actually happening in core inflation.”

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