U.S. Fed chair reiterates political independence ahead of election

0 Comment(s)Print E-mail Xinhua, July 11, 2024
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WASHINGTON, July 10 (Xinhua) -- U.S. Federal Reserve Chair Jerome Powell on Wednesday reiterated that the central bank will make decisions based on economic data and won't take political factors into consideration, as the central bank is expected to cut rates before the Nov. 5 election.

"We make our decisions based on economic data, evolving outlook, balance of risks. We don't take into consideration other things, any other factors, including political factors," Powell said in response to a question during a House Financial Services Committee hearing.

"We're not looking at things like election cycles. We're not looking at any of those things. We're looking at the data," said the Fed chair.

The Fed's next meeting is scheduled for July 30-31. Officials are expected to keep the benchmark interest rate unchanged at a 22-year-high range of 5.25-5.5 percent, which was approved in July last year.

The Chicago Mercantile Exchange (CME) Group's FedWatch Tool, which acts as a barometer for the market's expectation of the Fed funds target rate, showed that the probability of the Fed maintaining rates at the July meeting is over 95 percent as of Wednesday. The probability of a rate cut at the September meeting is 70 percent.

Powell indicated that the Fed was inching closer to a rate cut decision, but greater confidence in progress on inflation is needed before taking such action.

"We want to be more confident, we want to have greater confidence, and that means more good inflation readings that inflation is moving sustainably down to 2 percent," he said.

The U.S. personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, rose 2.6 percent in May from a year ago, still higher than the central bank's long-term inflation target.

Powell also highlighted the central bank's dual mandate of price stability and maximum employment. "I would say we're at a place now where the risks to the two mandates are much more in balance than they were," he said.

"That means it's not just about getting inflation down. The job is not done on inflation. We have more work to do there, but at the same time we need to be mindful of labor market. So we have seen considerable softening in the labor market," he noted.

The latest monthly employment report showed the U.S. unemployment rate ticked up to 4.1 percent in June, much higher than the 3.6 percent a year earlier.

In the minutes of the June policy meeting released last week, U.S. Federal Reserve officials cited "a marked deterioration in labor market conditions" as one of the downside risks to economic activity.

On Tuesday, Powell attended a hearing before the Senate Banking, Housing, and Urban Affairs Committee. He presented the Semiannual Monetary Policy Report to Congress over his two days appearing before the Senate and House committees. Enditem

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