Jerome Powell Says the ‘Time Has Come’ for the Fed Begin Reducing Interest Rates

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With inflation nearly defeated and the job market cooling, the Federal Reserve is prepared to start cutting its key interest rate from its current 23-year high, Chair Jerome Powell said Friday.

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00:00Overall, the economy continues to grow at a solid pace,
00:03but the inflation and labor market data show an evolving situation.
00:08The upside risks to inflation have diminished,
00:11and the downside risks to employment have increased.
00:14As we highlighted in our last FOMC statement, we are attentive to the risks
00:19to both sides of our dual mandate.
00:21The time has come for policy to adjust.
00:26The direction of travel is clear, and the timing and pace
00:29of rate cuts will depend on incoming data,
00:32the evolving outlook, and the balance of risks.
00:36We will do everything we can to support a strong labor market
00:39as we make further progress toward price stability.
00:43With an appropriate dialing back of policy restraint, there is good reason
00:46to think that the economy will get back
00:48to 2% inflation while maintaining a strong labor market.
00:52Four and a half years after COVID-19's arrival,
00:56the worst of the pandemic-related economic distortions are fading.
01:00Inflation has declined significantly.
01:03The labor market is no longer overheated,
01:06and conditions are now less tight than those
01:08that prevailed before the pandemic.
01:10Supply constraints have normalized, and the balance of risks
01:14to our two mandates has changed.
01:17Our objective has been to restore price stability while maintaining a strong labor
01:21market, avoiding the sharp increases in unemployment
01:24that characterized earlier disinflationary episodes
01:28when inflation expectations were less well-anchored.
01:31While the task is not complete, we have made a good deal
01:34of progress toward that outcome.
01:37Our efforts to moderate aggregate demand and the anchoring
01:40of expectations have worked together to put inflation
01:43on what increasingly appears to be a sustainable path to our 2% objective.
01:50Disinflation while preserving labor market strength is only possible
01:53with anchored inflation expectations,
01:55which reflect the public's confidence that the central bank will bring
01:58about 2% inflation over time.
02:01The cooling in labor market conditions is unmistakable.
02:05Job gains remain solid but have slowed this year.
02:09Job vacancies have fallen, and the ratio of vacancies
02:12to unemployment has returned to its pre-pandemic range.
02:16The hiring and quits rates are now below the levels that prevailed in 2018 and 19.
02:21Nominal wage gains have moderated, and all told,
02:24labor market conditions are now less tight than just before the pandemic
02:28in 2019, a year when inflation ran below 2%.
02:34It seems unlikely that the labor market will be a source
02:36of elevated inflationary pressures anytime soon.
02:41We do not seek or welcome further cooling in labor market conditions.

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