Current:Home > ScamsTakeaways from Fed Chair Powell’s speech at Jackson Hole -MoneyBase
Takeaways from Fed Chair Powell’s speech at Jackson Hole
View
Date:2025-04-18 04:31:21
WASHINGTON (AP) — Federal Reserve Chair Jerome Powell all but proclaimed victory in the fight against inflation and signaled that interest rate cuts are coming in a much-anticipated speech Friday in Jackson Hole, Wyoming.
Under Powell, the Fed raised its benchmark rate to the highest level in 23 years to subdue inflation that two years ago was running at the hottest pace in more than four decades. Inflation has come down steadily, and investors now expect the Fed to start cutting rates at its next meeting in September — an expectation that essentially got Powell’s endorsement Friday.
Declaring Victory
“My confidence has grown that inflation is on a sustainable path back to 2%,” Powell said in his keynote speech at the Fed’s annual economic conference in Jackson Hole.
He noted that inflation, according to the Fed’s preferred gauge, had fallen to 2.5% last from a peak of 7.1% two years ago. Measured by the better known consumer price index, inflation has dropped from a peak 9.1% in mid-2022 to 2.9% last month. Both are edging closer to the Fed’s 2% target.
Powell sounded confident that the Fed would achieve a so-called soft landing — containing inflation without causing a recession. “There is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market,’' he said.
Higher rates contributed to progress against inflation, as did the easing of supply chain bottlenecks and worker shortages that caused shipping delays and higher prices as the economy bounded back with unexpected strength from COVID-19 lockdowns.
Signaling Rate Cuts
Powell suggested Friday that rate cuts are all but inevitable. “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 said.
Last year, the Fed had predicted that it would trim rates three times this year. But the cuts kept getting pushed back as the progress against inflation faltered early in 2024. Since then, the steady drop in inflation has resumed, giving the Fed more confidence that victory was in sight.
Abandoning the Good Ship “Transitory’’
Powell acknowledged that he and his Fed colleagues misjudged the inflationary threat when it emerged in early 2021. At the time, they expected the flareup of higher prices to be short-lived — the temporary consequence of pandemic-related supply chain disruptions. The pressure, they thought, would fade “fairly quickly without the need for a monetary policy response — in short, that the inflation would be transitory.’'
They weren’t alone in their optimism. “The good ship Transitory was a crowded one,’' Powell said, ”with most mainstream analysts and advanced-economy central bankers on board.’'
But the word “transitory″ came back to haunt the Fed as inflation proved more intractable than expected. It spread from goods that were subject to supply chain backlogs into services, where it is harder to dislodge without raising rates and risking severe economic pain in the form of layoffs and higher unemployment. The Fed proceeded to raise rates 11 times in 2022 and 2023.
A Little Humility
Powell admitted that policymakers and economists have struggled to understand and respond to an economy that has been unpredictable since COVID-19 hit in early 2020. First, the pandemic shut down commerce and companies collectively slashed millions of jobs. Then the economy roared back with unexpected vigor, setting off inflationary pressures that been dormant since the early 1980s. When the Fed belated responded with aggressive rate hikes, economists predicted the hiring borrowing costs would cause a painful recession. But it didn’t.
“The limits of our knowledge — so clearly evident during the pandemic — demand humility and a questioning spirit focused on learnings lessons form the past and applying them flexibly to our current challenges,’' Powell said.
veryGood! (814)
Related
- 'No Good Deed': Who's the killer in the Netflix comedy? And will there be a Season 2?
- Toyota recalls 2023: Check the full list of models recalled this year
- Is pot legal now? Why marijuana is both legal and illegal in US, despite Biden pardons.
- Where to watch 'Elf' movie this Christmas: Streaming info, TV channel, cast
- Which apps offer encrypted messaging? How to switch and what to know after feds’ warning
- Barry Gibb talks about the legacy of The Bee Gees and a childhood accident that changed his life
- Dixie Chicks Founding Member Laura Lynch Dead at 65 After Car Crash
- Premier League has its first female referee as Rebecca Welch handles Fulham-Burnley
- The Daily Money: Spending more on holiday travel?
- Chris Evans and Wife Alba Baptista Make Marvelous Appearance at Star-Studded Holiday Party
Ranking
- Which apps offer encrypted messaging? How to switch and what to know after feds’ warning
- Alabama woman with rare double uterus gives birth to twin girls — on 2 different days
- The star quarterback that never lost...and never let me down
- New York governor vetoes bill that would ban noncompete agreements
- US wholesale inflation accelerated in November in sign that some price pressures remain elevated
- Russian shelling kills 4 as Ukraine prepares to observe Christmas on Dec. 25 for the first time
- China OKs 105 online games in Christmas gesture of support after draft curbs trigger massive losses
- Stock market today: Asian shares are mixed, with most markets shut, after Wall St’s 8th winning week
Recommendation
Macy's says employee who allegedly hid $150 million in expenses had no major 'impact'
NFL owners created league's diversity woes. GMs of color shouldn't have to fix them.
NFL playoff clinching scenarios for Week 16: Chiefs, Dolphins, Lions can secure berths
Cameron Diaz wants to normalize separate bedrooms. Here's what to know about sleep divorce.
Paige Bueckers vs. Hannah Hidalgo highlights women's basketball games to watch
In which we toot the horn of TubaChristmas, celebrating its 50th brassy birthday
Wisconsin Supreme Court tosses GOP-drawn legislative maps in major redistricting case
FDA says watch out for fake Ozempic, a diabetes drug used by many for weight loss