Federal Reserve Signals Measured Interest Rate Cuts to Support Economy

Federal Reserve Chair Jerome Powell indicated more interest rate cuts are coming, but at a measured pace to support the economy. Powell spoke at the National Association for Business Economics conference, suggesting two more quarter-point cuts this year. Friday's job report could alter the Fed's policy path.

Federal Reserve Chair Jerome Powell signaled on Monday that more interest rate cuts are in the pipeline, but they would happen at a measured pace to support a still-healthy economy. Speaking at the National Association for Business Economics conference in Nashville, Tennessee, Powell dampened investors' hopes for another steep half-point rate cut before year-end. The S&P 500 briefly fell 0.6% after his remarks but later closed about 0.4% higher.

Powell emphasized the Fed is recalibrating its key interest rate to support the job market and overall economic health. Economists are now eyeing Friday's jobs report as a crucial piece of data that may influence the Fed's policy. If unemployment increases or hiring falters, officials might consider a sharper rate cut this year. During their last meeting, Fed officials reduced rates to 4.8% and penciled in two more quarter-point cuts for November and December.

Powell stressed the Fed's goal of maintaining a healthy economy and job market rather than rescuing a struggling economy. He noted the US economy's solid state, supported by moderate inflation and steady job hiring. Additional rate cuts aim to lower borrowing costs, benefiting consumers and businesses alike. Diverging views among Fed policymakers suggest a cautious approach to further rate reductions.

(With inputs from agencies.)