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The rate cut comes after more than two years of high rates that helped tame inflation but also made borrowing painfully expensive for American consumers.
With inflation nearly defeated and the job market cooling, the Federal Reserve is prepared to start cutting its key interest rate from its current 23-year high, Chair Jerome Powell said Friday.
Wednesday’s report from the Labor Department showed that consumer prices rose just 0.2% from June to July after dropping slightly the previous month for the first time in four years.
In a better-than-expected report, consumer prices declined 0.1% from May to June after having remained flat the previous month, the government reported Thursday.
With the nation’s households continuing their steady spending, many employers have had to keep hiring to meet their customer demand.
Friday’s report from the Commerce Department showed that an index that excludes volatile food and energy costs rose 0.2% from March to April, down from 0.3% in the previous month.
Measured year-over-year, April inflation ticked down from 3.5% to 3.4%.
The Fed emphasized that inflation has remained stubbornly high in recent months and said it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are slowing sustainably to its 2% target.
Prices outside the volatile food and energy categories rose 0.4% from February to March, the same accelerated pace as in the previous month.
Chair Jerome Powell noted that inflation has cooled considerably but it’s “still too high, ongoing progress in bringing it down is not assured and the path forward is uncertain.”
Compared with a year ago, prices are up 3.1%. That is less than the 3.4% figure in December and far below the 9.1% inflation peak in mid-2022.
After an extended period of gloom, Americans are starting to feel better about inflation and the economy — a trend that could sustain consumer spending and fuel economic growth.
U.S. businesses and other employers added a healthy 199,000 jobs last month and the unemployment rate fell, fresh signs that the economy could achieve an elusive “soft landing.”
It’s a sign that the Federal Reserve’s interest rate hikes are continuing to cool the price spikes that have bedeviled consumers for the past two years.
Federal Reserve Chair Jerome Powell the economy is growing faster than the Fed had expected and could continue to keep inflation elevated.