Fed’s Powell: Economy stronger than expected, allows cautious rate cuts

Fed Chair Jerome Powell expressed optimism about the US economy during an event overnight, stating it is in “very good shape” with “no reason for that not to continue.” He highlighted reduced downside risks in the labor market, stronger-than-expected growth, and inflation running slightly higher than previously anticipated.

Given these developments, Powell suggested the Fed could “afford to be a little more cautious” in its approach to cutting interest rates as it works toward a neutral policy stance.

Reflecting on Fed’s 50bos cut in September, Powell noted it was intended as “a strong signal” of support for a potentially weakening labor market. However, subsequent data revisions revealed that the economy was “even stronger than we thought”.