President Jerome Powell, chair of the United States Federal Reserve, spoke at an event in Georgia this Friday. He described inflation as moving in the right direction and stressed the need for prudence in monetary policy.
Inflation remains above the official target, yet Powell noted progress. He said the appropriate course is to proceed cautiously, watch how events unfold, and let the data guide decisions. Latest indicators point to underlying inflation easing, with fluctuations in food and energy helping to keep it around 2.5 percent.
The head of the North American export institute explained that the ongoing boom cycle is putting pressure on economic activity due to its restrictive nature. He cautioned that tighter conditions could become more pronounced or delayed in their full effects and may not yet be fully visible in the data.
The Fed’s response to rising living costs has helped preserve the agency’s credibility. Powell emphasized that inflation expectations among households and businesses have remained firmly anchored.
Powell reaffirmed the Fed’s strong commitment to lowering inflation to the 2 percent target. A restrictive policy stance will be maintained until price gains clearly approach that goal. He warned against assuming that the current restrictive tone has already been achieved and noted that policy will adapt as needed.
Powell also reminded listeners that if warranted, the interest rate could be raised again. Decisions are made at scheduled meetings, with careful consideration of data quality, its impact on economic activity, and the balance of risks to inflation.
Predictions
On the future, Powell argued that the labor market remains robust but is expected to slow to a pace compatible with sustainable job creation.
Household spending has been strong as pent-up demand during the pandemic gradually wanes. This momentum may ease as credit card usage and defaults rise, reflecting tighter financial conditions for some households.
GDP growth for the third quarter is expected to show a very solid performance, though a moderation is anticipated as the data evolves, and Powell noted that available information remains limited.
Turning to technology, Powell mentioned the role of artificial intelligence as a factor in future economic dynamics. The Fed is in the early stages of exploring AI applications, and there is considerable uncertainty about whether it will create more jobs or displace them in the near term.