Powell signals Fed to continue rate cuts, but path isn’t on preset course

Investing.com — Federal Reserve Chairman Powell signaled Monday that the Fed will continue cut interest rates toward a more neutral stance, but stressed that the future path of rates isn’t on a preset course and monetary policy will be meeting by meeting. 

“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance,” Powell said in prepaid remarks Monday ahead of an appearance of the National Association for Business Economics. 

A neutral level of interest rates is one that neither supports nor curbs economic growth. 

Powell said, however, that the path of future interest rates isn’t on “any preset course,” and risks to the central bank’s mandate of stable inflation and maximum employment are two-sided.

Voting Fed members “will continue to make our decisions meeting by meeting,” Powell added, reiterating that policy decision will be driven by incoming economic data.

In a sign that the Fed is more optimistic about the delivering a soft landing or avoid an economic recession, Powell said that the low gross domestic income level relative to the GDP level over the past year had triggered worries about the strength of the economy, but the gap has narrowed recently, cooling growth worries. 

“That’s (GDI versus GDP) been a downside risk that we’ve been monitoring … but there’s now no gap between the two,” Powell said. ” That, I would say, removes a downside risk to to the economy.”

The remarks come just weeks after the Fed cut rates by 50 basis points, attributing the size of the cut to confidence that easing monetary policy measures would help “maintain strength in the labor market and continue push inflation down to the 2% target.”

The labor market, however, still remains strong Powell said, adding that there isn’t a “need to see further cooling in labor market conditions to achieve 2 percent inflation.”

“Disinflation has been broad based, and recent data indicate further progress toward a sustained return to 2 percent,” the fed chief added.