Powell speech: More recent readings on inflation have shown easing
12.06.2024, 18:37

Powell speech: More recent readings on inflation have shown easing

Federal Reserve Chairman Jerome Powell explains the decision to leave the policy rate, federal funds rate, unchanged at the range of 5.25%-5.5% and responds to questions in the post-meeting press conference.

Key quotes

"Our economy has made considerable progress."

"Continued strong job gains in the economy."

"Inflation has eased substantially but it's still too high."

"We are maintaining a restrictive stance to keep demand in line with supply."

"Recent indicators suggest economic growth still expanding at solid pace."

"Private domestic final purchases, a clearer signal, is still strong."

"Consumer spending remains solid."

"Investment in equipment has picked up from an anemic pace."

"Labor market coming into better balance."

"April and May jobs pace still strong, unemployment rate remains low."

"A broad set of indicators suggest the labor market back to where it was on the eve of the pandemic."

"Overall broad set of indicators in the labor market show it is relatively tight but not overheated."

"We expect labor market strength to continue."

"More recent readings on inflation have shown easing."

"So far this year, we have not got greater confidence on inflation in order to cut."

"Will need to see more good data to bolster confidence on inflation."

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

 

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