THE president of the Federal Reserve (Fedthe central bank of the United States), Jerome Powell, began press conferencethis Wednesday (10), after the American BC reduce interestreiterating the risks for both sides of the mandate, but believing that the deterioration of the labor market has made flexibility of 0.25 percentage points (pp) appropriate in the December decision. “We are in a good position to see how the economy evolves,” he said.
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- The Fed cuts interest rates by 0.25 percentage points, to a range between 3.50% and 3.75%
“There is no risk-free path to monetary policy, as we navigate this tension between our goals of job And inflation“Powell said. The Fed president also stressed that the risks for inflation are oriented upwards and, for employment, downwards.
“Our obligation is to ensure that a one-off increase in the price level does not become a continuing inflation problem, but with the decline in employment in recent months, the balance of risks has changed,” he said to justify the interest rate cut.
Even though important data was delayed by strike (“dejected“) of federal governmentAvailable public and private sector indicators suggest that the outlook for employment and inflation has not changed much since the October meeting. “Labor market conditions appear to be gradually cooling and inflation remains somewhat elevated,” Powell said.
Powell also noted that available indicators suggest that economic activity has expanded at a moderate pace.
Keeping an eye on economic data
Powell also reiterated the monetary authority’s cautious, data-dependent stance until the authority’s next meeting in January. The leader’s speech comes amid a delay in the publication of data caused by the shutdown of the American government.
“We will have a lot of the data from December to January and we will analyze it very carefully and with a somewhat skeptical eye,” Powell emphasized. The president of the US central bank also highlighted the dangers for both sides of the mandate. “The situation is that our two goals are in conflict.”
Asked about the high degree of division within the Federal Open Market Committee (FOMC), despite three divergences at today’s meeting, Powell accurately attributed the situation to risks to prices and employment. He said all committee members agree that inflation is high and there is a desire to reduce it, but they also agree that the labor market has weakened and there are more risks.
“The difference is how to weigh those risks, what the forecasts are and where the greatest risk lies,” Powell said. “We hope the data will give us a clear reading, but we have conflicting opinions,” he added.
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