Fed Rate Cuts On Radar? Jerome Powell Weighs In - Details

Fed Chair Jerome Powell, on Friday, remarked that US Central Bank is looking to move towards a more 'neutral setting', without clarifying what that is. Ongoing economic growth, a solid job market, and inflation that remains above its two per cent target mean Federal Reserve does not need to rush to lower interest rates, Fed Chair Jerome Powell said on Thursday, as reported by Reuters.

What Is ‘Neutral Setting’?

Powell's remark indicates that borrowing costs will remain higher for longer for households and businesses. phrase 'neutral setting' is still vague given change US is undergoing. With Trump winning Presidential election, his take on higher economic tariffs, and tighter immigration policy can have an impact on economy and inflation. "We can do arithmetic. If are fewer workers re'll be less work done," Powell said, before ding "this is getting me into political issues that I really want to stay as far away from as I possibly can." said Powell, as reported by Reuters. 

Why Is It Vague?

Powell also clarified that it will take sometime before y can acclimatise to Trump's new policies. Last week's election has possibly turned voter's perception to nation's economic ills, despite which Powell said current situation was actually “remarkably good.” unemployment rate is still low at 4.1per cent, with economy growing at 2.5 per cent annual pace, a number that remains above Fed's estimates, as reported by Reuters. While Powell still has faith in disinflation, it is still expected that Fed will cut rates by a quarter of a percentage point in Dec 17-18 meeting. Fed uses heline Personal Consumption Expenditure (PCE) price index to set inflation target which stands now at two per cent

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