LOC23:52
20:52 GMT
WASHINGTON – 10-14 (KUNA) — US Federal Reserve Chairman Jerome Powell expressed on Tuesday his concerns about the risks of a contraction in the labor market on the economy in the United States and its imbalance between employment and inflation. In a strong indication that the US Central Bank is heading to further reduce federal interest rates this year.
During a speech he delivered at the National Association for Business Economics conference in Philadelphia, the head of the US Federal Reserve said, “The unemployment rate remained low until August, and wage gains slowed sharply,” which he attributed in part to “lower labor force growth as a result of lower rates of immigration and participation in the labor market.”
Powell continued, “In the less dynamic labor market, it appears that downside risks to employment have risen,” noting that the US Federal Reserve “had responded to the situation in September by reducing a quarter of a percentage point on the federal funds rate.”
Markets are highly anticipating two more cuts this year, with several Federal Reserve officials recently endorsing that view. However, Powell said, “There is no risk-free path for monetary policy given the tension between our employment and inflation goals.”
Powell noted that based on the available data, “it is fair to say that employment and inflation expectations do not appear to have changed much since our meeting in September four weeks ago.”
He warned that before the current closure, economic growth “may be on a more stable path than expected,” but he noted that the current rise in commodity prices is mostly due to “customs tariffs” and not to “inflation pressures.”
There are widespread expectations in the American markets that interest rates will be reduced by a quarter of a percentage point during the Fed’s meeting scheduled for October 29-82, after it had reduced them by a similar percentage in the meeting of last September 17 (the first in Trump’s second presidency), keeping them in a range between 4 and 4.25 percent at a time when the American economy is witnessing a decline in the labor market and a slowdown in growth.
On the other hand, Powell confirmed that the Federal Reserve is close to ending the “quantitative tightening” program, which aims to reduce its holdings of bonds, and spoke of indications that the Federal Reserve is close to its goal of providing abundant reserves to banks.
Powell indicated that the plan is to stop the depletion of the general budget when reserves are slightly higher than the level that we see as consistent with the conditions for abundant reserves.
He added, “We may be approaching this point in the coming months, and we are closely monitoring a wide range of indicators to make this decision.”
It should be noted that when financial conditions become severe, the US Federal Reserve seeks to secure abundant reserves that enable banks to access liquidity and maintain the continuity of the economy, which is a step that reduces the severity of the recession and prevents excessive capital flow into the financial system. (The End) R S R / M A H A / E S R
