Federal Reserve Chairman Jerome Powell delivered his first public speech Tuesday since the Fed’s inflation indicator showed prices rose at their slowest pace in more than three years in May.
While Powell is still cautious, he admits the data has been moving in the right direction lately.
Yahoo Finance’s Jennifer Schonberger reports:
Powell said Tuesday he is hopeful about lower inflation, but also stressed that the central bank needs to see more evidence before cutting rates.
The last two inflation numbers in April and May “indicate we are moving back onto a disinflationary path,” Powell said during a panel in Portugal for a European Central Bank conference.
Powell’s comments come days after the latest reading of the Fed’s desired inflation target — the “core” personal consumption expenditures (PCE) index — rose 2.6% in May, in line with expectations and down from 2.8% in April.
On a monthly basis, inflation rose by 0.1%, also in line with expectations and down from 0.2% in April.
The reading provided fresh support for rate cuts later this year and eased concerns raised in the first quarter that higher-than-expected inflation could derail plans for monetary policy easing in 2024.
Despite another positive sign of declining inflation, 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 as early as September.
Instead, he stressed that the Fed needs more time and evidence that inflation is coming down sustainably toward its 2% target. He said the central bank can afford to be patient, given the strong labor market that is gradually cooling.
“We’ve made a lot of progress,” Powell said. “We just want to understand that the levels that we’re seeing are a true reflection of what’s actually happening with underlying inflation.”
