Federal Reserve Chair Jerome Powell participated in a panel discussion at the ECB Forum on Central Banking in Sintra, Portugal, alongside ECB President Christine Lagarde and Central Bank of Brazil Governor Campos Neto on Tuesday.
In a note to clients, analysts at UBS said Powell highlighted the balance of risks, consistent with his views from the June post-FOMC press conference.
Furthermore, he was said to have emphasized the strength and rebalancing of the labor market, which he sees as providing the Federal Open Market Committee (FOMC) with the “ability to take our time and get this right” regarding monetary policy. In addition, he noted that while progress on disinflation is resuming, the Committee still needs “more good data before cutting rates.”
This cautious stance on the labor market is one reason UBS has delayed its expectations for the first rate cut to December, despite an already slowing economy.
Acknowledging recent improvements in inflation data, Powell pointed out that 12-month core PCE inflation decreased by 0.2 percentage points to 2.6% in May, indicating significant progress towards the FOMC’s target.
He is said to have stressed the need for more consistent data to confirm underlying inflation trends, stating, “What we’d like to see is more data like what we’ve been seeing recently.”
Powell reiterated that the labor market while cooling, remains “strong” and is rebalancing appropriately. He maintained that a 4.0% unemployment rate is historically low, underscoring the ongoing strength of the labor market.
UBS notes that Powell’s balanced perspective aligns with recent comments from other Fed officials, highlighting the diverse views on the risks to the dual mandate, with some focusing on signs of economic slowing and others on inflation risks.
UBS’s analysis underscores Powell’s careful balancing act amid economic uncertainties and highlights the ongoing cautious stance of the Federal Reserve on monetary policy adjustments.
