“The time for an adjustment has come”: The head of the US Federal Reserve, Powell, has announced a reduction in the historically high key interest rate. Experts expect this to happen in September.
The head of the US Federal Reserve, Jerome Powell, has promised an imminent interest rate cut. “The time has come for an adjustment of policy,” said Powell at the Federal Reserve conference in Jackson Hole in the US state of Wyoming.
Powell did not specify a time, but market observers believe a rate cut is likely at the Fed's September meeting. “The direction is clear, and the timing and pace of rate cuts will depend on incoming data, evolving forecasts and the balance of risks,” Powell said.
Powell sees progress in fight against inflation
With regard to inflation, Powell stressed that the fight against the rapid rise in consumer prices is not yet over, but that “great progress” has been made. With “appropriate” monetary policy easing, there is good reason to believe that the inflation rate will fall to the Fed's target of two percent while the labor market will remain strong.
Inflation in the US unexpectedly slowed in July. Consumer prices rose by 2.9 percent compared to the same month last year.
Key interest rates at historically high levels
The Federal Reserve last lowered the key interest rate in March 2020 – to stimulate the economy in the early stages of the corona pandemic. After that, interest rates initially remained at zero – until the Fed began raising rates at a record pace in March 2022 and raised the interest rate to its current level a year ago.
Commercial banks can borrow central bank money at the Fed's interest rate. This means that a reduction in interest rates also makes loans cheaper for consumers and companies. The key interest rate is currently at its highest level in more than 20 years, with a range of 5.25 to 5.5 percent.
