Powell: US economy has made progress towards achieving Fed’s two goals

Federal Reserve Chairman Jerome Powell began his press conference noting that the US economy had made progress toward achieving the Fed’s two goals of reducing inflation to 2% and maximizing employment.

“Our economy has made significant progress toward achieving both goals over the past few years,” Powell said. “The labor market has become better balanced, with continued strong job gains and a low unemployment rate. Inflation fell significantly from [about] 7% to 2.7%. But it is still very high.”

According to CNBC, Powell stressed that rising prices are showing signs of slowing, based on recent readings, and according to the Federal Reserve Chairman, the latest series of inflation readings are showing signs of slowing price pressures.

“Inflation data reported earlier this year was higher than expected, although the more recent monthly readings have eased somewhat,” Powell said Wednesday following the Federal Reserve meeting. “Longer-term inflation expectations appear to be well established.”

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Powell noted that inflation data this year did not give the Fed “more confidence” that it is approaching the 2% target.

“We will need to see more good data to boost our confidence that inflation is moving sustainably towards 2%,” he said.

Powell explained that Fed members had the opportunity to update their answers to the summary of economic expectations in light of the Consumer Price Index report issued this morning.

“We make sure people remember that they have the ability to upgrade,” Powell said. We ask them to do so. … What’s in the Consumer Price Expectations report already reflects the data we got today, to the extent that you can reverse it in a day.”

Following its meeting on Wednesday, the Federal Reserve left its interest rate unchanged at between 5.25 and 5.5%, noting that its officials are considering reducing this rate once this year.

The Federal Reserve’s Monetary Policy Committee revised its growth forecasts for 2024 and 2025 to 2.6% and 2.3%, respectively, indicating “modest additional progress” to achieve the 2% inflation target. Expectations for future GDP growth remained similar to those issued in March, i.e. 2.1% for the year 2024 and 2.0% for the year 2025.

In the Fed’s statement, central bank leaders acknowledged further “modest” progress in reducing price growth to 2%. Previously, the Fed said there had been a “lack” of recent progress.

The Fed chief said the recent strong jobs data may be a bit “exaggerated,” suggesting that benchmark revisions may be on the way.

Pointing to US payroll reports: “There is an argument that they may be a bit overstated, but they are still strong. “We see a gradual slowdown, a gradual movement toward a better balance.”

Nonfarm payrolls expanded by 272,000 for May, up from 165,000 in April and ahead of the Dow Jones consensus estimate of 190,000.