Fed’s Powell: Inflation has eased by core inflation is still too high

Federal Reserve Chair Jerome Powell said on Friday that the central bank is getting what they wanted to get and they don’t have to be in a rush at the moment. He noted that inflation is still well above target but moving in the right direction. 

At a Fireside Chat at Spelman College in Atlanta, Powell explained that it is the data that will tell if the Fed has done enough or needs to do more. He argued they are on a path to get inflation down to the 2% target without large job loss. 

Chair Powell added that consumer spending has been surprisingly strong. Regarding fiscal policy he mentioned that is unsustainable in the long run. 

Key takeaways from opening remarks: 

By many measures, conditions in the labor market are very strong (…) Today, labor market conditions remain very strong, and the economy is returning to a better balance between the demand for and supply of workers. 

The pace at which the economy is creating new jobs remains strong, and has been slowing toward a more sustainable level. That gradual slowing has come in part due to the efforts of the Fed to slow the growth of the economy to help reduce inflation.

Partly because of that labor force growth, the unemployment rate has edged up over the second half of the year, though it remains historically low at 3.9 percent. 

The FOMC is strongly committed to bringing inflation down to 2 percent over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective. It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so.

Market reaction

During Powell's presentation, the US Dollar Index (DXY) accelerated to the downside, falling below 103.30. At 19:00 GMT, Powell will participate in a roundtable with Fed’s Governor Lisa Cook, speaking with technology innovators and entrepreneurs at Spelman College.