Powell rehearses the “soft landing” of the world’s largest plane worth 27 billion dollars

The president of the United States Federal Reserve (Fed) is looking at the right time to start cutting interest rates. The strongman at the US central bank wants a soft landing, in timing exactly, to prevent the largest economy in the world from collapsing. This Tuesday, heard in the Senate, Jerome Powell may have started preparing the landing strip.

At the Senate Banking Committee, Powell said that the economy was “no longer overheating” and that the job market – one of the Fed’s headaches – “has cooled considerably” to an identical level to pre-pandemic. All arguments that suggest that the central bank could start cutting interest rates at the next September meeting.

“The most recent labor market data gave us a clear signal that conditions have cooled compared to two years ago,” says Powell, at the Senate Banking Committee, explaining that this risk, along with economic activity , are two crucial factors for decision-making.

Economic projections released last month showed that most Fed policymakers are anticipating cutting interest rates once or twice this year if inflation slows and the economic growth slows down.

In May, US annual inflation fell to 3.3%, compared to 3.6% recorded in the previous month. New data will be released later this week. In the labor market, the unemployment rate rose to 4.1% in June, compared to 3.7% at the end of last year.

“Our position is that the Federal Reserve does not want to cause a recession and if the data permits, we hope it will begin to shift monetary policy from “restrictive†territory to “restrictive†policy. “slightly less†restrictive from September onwards”, says James Knightley, chief economist at ING, in the United States, in a note reacting to Powell’s words.

The economist says that, for this scenario to come to fruition, three things will be necessary: ​​underlying inflation continues to reach 0.2% in monthly terms to bring annual inflation for the 2% target; the unemployment rate (which rose from 3.4% to 4.1% in June); and consumption by North Americans (which has slowed down).

After being in Sintra, at the European Central Bank event, Powell will travel in August to Jackson Hole, in the state of Wyoming, for the annual meeting of the United States Federal Reserve. And then, according to the ING economist, it could provide new clues regarding a possible interest rate cut.

In Sintra, Powell looked with concern at the inflation of services, linking this price resistance to the increase in citizens’ salaries, which generates greater spending in this component (dinners in restaurants, vacations, etc.). Asked whether September would be a good date to start cutting interest rates, the Fed leader said he had not “no date in mind”.

Another of the concerns raised by Powell tied to public debt. “The US currently has a very large deficit. The level of debt we have is not unsustainable, but the path we are taking is not sustainable,†she commented.

The Fed raised interest rates at the highest rate in the last 40 years, between 2022 and 2023. Currently, the main rate is in the range of between 5.25% and 5.5%.

In the euro zone, the next meeting of the European Central Bank (ECB) is in September. Doves like Mário Centeno have been suggesting that there could be a new interest rate cut next month and several until the end of the year, but Christine Lagarde, in an interview with RTP, You’ve already put the water on the boil. Centeno is right “in theory†: “We can lower interest rates at all meetings this year, but only with strong data”, he assured.


Francesco Giganti

Journalist, social media, blogger and pop culture obsessive in newshubpro

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