Fed Chair Powell Signals Flexibility in Rate Cuts, Maintains Commitment to Strong Economy

At a press conference on September 19, Federal Reserve Chair Jerome Powell stated that there is no indication of the Fed acting hastily in its projections. He emphasized the Fed's ability to adjust its pace of rate cuts, including the possibility of accelerating, slowing down, or pausing reductions as needed.

Powell noted that the Fed could slow down rate cuts if the economy remains robust. Conversely, the Fed would respond to a deteriorating labor market. He emphasized that projections are not plans or decisions and that the Fed will adjust its policies as necessary.

Taking risks into account, the Fed lowered interest rates by 50 basis points on this day. This adjustment is aimed at maintaining the strength of the economy and labor market.

Powell also revealed that if the Fed had seen the nonfarm payroll report, released days after the July decision, beforehand, it might have implemented the first rate cut during the July meeting. The July nonfarm payroll report indicated weakness in the US labor market.

Chair Powell reaffirmed the Fed's unwavering focus on its dual mandate goals. He acknowledged that the overall US economy remains strong, and the labor market has cooled from its previous overheated state.

Today's decision reflects growing confidence in the ongoing strength of the labor market, and the Fed's commitment to maintaining economic strength. While unemployment has risen, it remains at a low level. The labor market environment continues to cool down, with the labor market not a source of high inflationary pressure. Downside risks to employment have increased.