Fed Rate Cuts On Radar? Jerome Powell Weighs In - Details

Fed Chair Jerome Powell, on Friday, remarked that the US Central Bank is looking to move towards a more 'neutral setting', without clarifying what that is. Ongoing economic growth, a solid job market, and inflation that remains above its two per cent target mean the Federal Reserve does not need to rush to lower interest rates, Fed Chair Jerome Powell said on Thursday, as reported by Reuters.

What Is ‘Neutral Setting’?

Powell's remark indicates that borrowing costs will remain higher for longer for households and businesses. The phrase 'neutral setting' is still vague given the change the US is undergoing. With Trump winning the Presidential election, his take on higher economic tariffs, and tighter immigration policy can have an impact on the economy and inflation. "We can do the arithmetic. If the are fewer workers there'll be less work done," Powell said, before adding "this is getting me into political issues that I really want to stay as far away from as I possibly can." said Powell, as reported by Reuters. 

Why Is It Vague?

Powell also clarified that it will take sometime before they can acclimatise to Trump's new policies. Last week's election has possibly turned the voter's perception to the nation's economic ills, despite which Powell said the current situation was actually “remarkably good.” The unemployment rate is still low at 4.1per cent, with the economy growing at 2.5 per cent annual pace, a number that remains above Fed's estimates, as reported by Reuters. While Powell still has faith in disinflation, it is still expected that Fed will cut rates by a quarter of a percentage point in the Dec 17-18 meeting. The Fed uses headline Personal Consumption Expenditure (PCE) price index to set the inflation target which stands now at two per cent

Also Read: PM Narendra Modi Unveils Projects Worth Rs 6640 Crore In Bihar: Full List | Republic Business