Fed Chairman: Not in a hurry to drastically reduce interest rates

During an economic forum in Tennessee on September 30, Chairman of the US Federal Reserve (Fed) Jerome Powell said the agency “does not see a need to rush to drastically reduce interest rates”.

“If the economy performs as expected, there will be two more cuts later this year, for a total of 50 basis points,” he said.

The Fed Chairman is confident that the US economy continues to grow. Recent revisions to income, consumption and savings were all upbeat, meaning GDP grew faster than expected. “The economy is in a solid state,” he said.

During the meeting on September 17 and 18, the Fed announced to reduce the reference interest rate by another 50 basis points (0.5%), to 4.75-5%. Officials from this agency forecast interest rates to decrease by another 0.5% at the end of this year and 1% next year. In 2026, they will lower it by another 0.5% to bring this figure to 2.75-3%.

Powell said the Fed’s goal is still to bring inflation to 2%, while maintaining a low unemployment rate. Data from the US Department of Commerce shows that in August, the personal consumption expenditures price index (PCE) – the Fed’s preferred inflation measure – increased by 2.2% over the same period last year.

After Powell’s statement, world gold prices decreased by 24 USD per ounce, to 2,634 USD. The main indexes on the US stock market increased slightly. Investors continue to increase their bets that the Fed will reduce interest rates by another 25 basis points (0.25%) in policy sessions from now until the middle of next year.

However, this weekend, the US will receive the September jobs report. The labor market report is released before the Fed’s November meeting. Employment data could influence the agency’s decisions.