New York Post


Inflation and jobs


Federal Reserve Chair Jerome Powell on Tuesday said the trade-offs between bringing inflation down and maintainin­g a solid labor market are changing, a significan­t pivot that may signal the central bank could finally start slashing interest rates.

“Elevated inflation is not the only risk we face,” Powell (inset) told the Senate Banking Committee during the first of two days of testimony. “We’ve seen that the labor market has cooled really significan­tly across so many measures . . . It’s not a source of broad inflationa­ry pressures for the economy now.”

Powell would not hint at when the Fed would slash rates — which many on Wall Street and in the Democratic ranks have hoped would begin in September, ahead of the presidenti­al election — but he did say the 23-year-high rates likely aren’t going to increase.

“It doesn’t seem likely that the next policy move would be a rate increase,” Powell said.

Behind the shifting outlook is labor-market data showing a slowdown in hiring and a mild, but steady, increase in the share of Americans looking for work amid an increase in the workforce, due partly to more immigratio­n.

The economy has continued to add more than 200,000 jobs a month, on average, this year. But the unemployme­nt rate has inched up to 4.1% in June from 3.7% in December, according to last week’s report.

Powell described the job market as roughly back to conditions seen before the pandemic hit, when it was “strong, but not overheated.”

Meanwhile, inflation fell to 2.6% in May, according to the Fed’s preferred gauge, down from 4% one year earlier but still above the Fed’s 2% target.

The Fed raised rates at the fastest pace in 40 years in 2022 and 2023 to combat inflation that also rose to a four-decade high. Officials have held their benchmark rate in a range between 5.25% and 5.5% since last July.

“We are well aware that we now face two-sided risks,” and can no longer focus solely on inflation, Powell said. “The labor market appears to be fully back in balance.”

Following Powell’s comments, investors put a nearly 70% probabilit­y on a Fed rate cut in September.

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