Powell on Economic Outlook:
Federal Reserve Chair Jerome Powell delivered a speech on the economic outlook on November 14, 2024, at the Economic Club of New York. In his remarks, Powell discussed the progress made in controlling inflation, the challenges facing the economy, and the Fed’s strategy for achieving its dual mandate of price stability and maximum employment.
Inflation Update:
Powell acknowledged that inflation has started to decline but emphasized that it remains elevated. He noted that core inflation, excluding food and energy, is still above 5%, well above the Fed’s target of 2%. Powell stated that the Fed will continue its efforts to bring inflation back to its goal.
Economic Outlook:
Powell expressed cautious optimism about the economic outlook. He said that the economy is still growing but that the pace of growth is slowing. He attributed this slowdown to the cumulative effect of the Fed’s interest rate hikes and other factors, such as supply chain disruptions.
Powell also noted that the labor market remains strong, with unemployment at a historically low level. However, he cautioned that wage growth is outpacing productivity gains, which could contribute to further inflationary pressures.
Fed Policy:
Powell reiterated the Fed’s commitment to achieving its dual mandate. He emphasized that the Fed will continue to raise interest rates until inflation is brought under control. He also indicated that the Fed is prepared to keep rates at a restrictive level for some time to ensure that inflation remains low.
Powell said that the Fed is closely monitoring the economy and will adjust its policy stance as necessary. He emphasized that the Fed is not on a preset path and that it will be data-dependent in its decision-making.
Market Reaction:
Powell’s speech was met with a positive reaction in the financial markets. Stock prices rose and bond yields declined, indicating that investors took Powell’s remarks as a sign that the Fed is committed to controlling inflation.
Conclusion:
Powell’s speech on the economic outlook provided insights into the Fed’s assessment of the current economy and its plans for the future. The Fed remains focused on bringing inflation under control while also supporting economic growth and employment. The path ahead will likely be challenging, but the Fed has indicated that it is prepared to do what is necessary to achieve its goals.
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