Fed Chair Powell signals interest rate cuts

Questions directed at Powell focused on the trajectory of inflation, future interest rate decisions in upcoming meetings, and the tariff decisions of U.S. President Donald Trump.

It was also noted that Powell mentioned PDFP, or “private domestic final purchases,” several times. This indicator is described as a measure of economic output after removing the effects of trade, inventories, and government spending. It was noted that many economists view this as a more reliable measure of underlying private sector demand.

Powell continued his remarks by drawing attention to potential risks that could arise in the labor market.

It was observed that Powell declined to confirm the projections released in June, which showed that the majority of officials supported two quarter-point interest rate cuts this year.

Regarding tariffs, Powell stated that “it is a very dynamic period for trade negotiations, but it is still too early to see when the situation will stabilize.”

Powell said he still expects tariffs to be reflected in consumer prices, but that this process might be “slower than initially expected.” Furthermore, it was noted that some companies might struggle to fully pass on tariff costs because consumers may be unwilling or unable to pay higher prices.

TRUMP'S VISIT TO THE CONSTRUCTION SITE WAS ASKED

Powell ended the discussion regarding whether the controversy over the cost of the Fed's renovation construction site was part of an effort to force the central bank to lower interest rates by saying, “It is not for me to say.” He stated that President Trump's visit to the Fed's renovation construction site was a “good visit.”

Responding to a question about high interest rates in the mortgage housing market, Powell stated that 30-year long-term interest rates are not directly managed by the Central Bank.

While noting that the primary duty of the Central Bank is to set overnight interest rates, Powell stated that these interest rates do have at least some impact on long-term rates.

Powell assessed current steps that could be positive for long-term interest rates as maximum employment and an inflation rate falling to the 2 percent level.

News Source: 12punto