“The economy is sending no signal that we need to rush to lower rates. The strength we are currently seeing in the economy gives us the opportunity to approach our decisions carefully. Ultimately, the path of the policy rate will depend on how incoming data and the economic outlook evolve.” This is the most important message launched by the chairman of the Federal Reserve, Jerome Powell, during an event in Dallas.
Good economic growth
According to Powell, the recent performance of the US economy “has been remarkably good, by far the best of any major economy in the world. Economic output grew more than 3 percent last year and is increasing at a sustained rate of 2.5 percent so far this year. Consumer spending growth remained strong, supported by rising disposable income and strong household balance sheets. Corporate investments in equipment and intangible assets have accelerated over the past year. In contrast, activity in the real estate sector was weak.”
Cooled job market
The labor market “remains in solid conditions, having cooled down from the significantly overheated conditions of a couple of years agoand has now returned, by many metrics, to more normal levels that are consistent with our jobs mandate – the central banker said – The number of job vacancies is now only slightly higher than the number of unemployed Americans looking for work . The rate at which workers are leaving their jobs is below its pre-pandemic pace, after hitting record highs two years ago. Salaries are still increasing, but at a more sustainable rate.”
Inflation no longer an emergency
According to Powell, “the job market has cooled to the point of no longer be a source of significant inflationary pressures. This cooling and substantial improvement in broader supply conditions have significantly reduced inflation over the past two years from its mid-2022 peak above 7 percent. Progress on inflation has been broad-based.”
“Inflation is getting very close to our long-term goal of 2 percent, but it’s not there yet,” he added. “We’re committed to finishing the job. With labor market conditions in rough balance and inflation expectations well anchored, I expect inflation to continue to decline towards our 2 percent target, albeit on a sometimes bumpy route“.
