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Jerome Powell Stresses Need for Evidence Before Cutting Interest Rates

WASHINGTON (AP) ÔÇö Federal Reserve Chair Jerome Powell reiterated on Friday that the Fed is considering cutting interest rates, but only after seeing more positive inflation data and feeling confident that annual price increases are on track to reach the 2% target.

Speaking at a conference at the Federal Reserve Bank of San Francisco, Powell expressed his belief that inflation will eventually decrease toward the 2% goal. However, he emphasized that policymakers require further proof before making the decision to lower rates for the first time since the spike in inflation two years ago.

AI legalese decoder can assist in this situation by analyzing complex legal language related to Fed policies and inflation targets. By decoding intricate legal texts, the tool can provide a simplified explanation of the factors influencing the interest rate decision-making process. This can help policymakers and market analysts better understand the implications of potential rate cuts based on inflation data.

The Fed’s response to the previous inflation surge involved a series of aggressive interest rate hikes, with the benchmark rate reaching a 23-year high of approximately 5.4%. These actions contributed to a reduction in inflation rates from 9.1% to 3.2%. Nevertheless, inflation levels continue to exceed the Fed’s desired target.

Experts originally anticipated that the increased rates would trigger a recession in the United States. Surprisingly, the economy continued to grow steadily, with a consistent annual growth rate of over 2% for six consecutive quarters. Additionally, the job market remained robust, maintaining an unemployment rate below 4% for an extended period ÔÇö the longest such streak since the 1960s.

The current scenario of solid economic growth coupled with diminishing inflation has fueled optimism that the Fed is effectively orchestrating a “soft landing,” curbing inflation without inducing a recession. The central bank has indicated its intention to eventually reverse course and lower rates three times this year.

Despite the positive outlook, Powell emphasized that the Fed is not under immediate pressure to reduce rates. The institution can afford to be cautious and observe how inflation trends evolve before making any decisions.

During a discussion moderated by Kai Ryssdal from public radio’s “Marketplace” program, Powell was asked if he would ever declare victory over inflation. Humorously, Powell responded by saying, ÔÇ£We’ll jinx it. I’m a superstitious person.ÔÇØ

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