At the New York Times DealBook Summit, Federal Reserve Chairman Powell delivered his final public speech of the year, offering investors deep insights into his policy stance and laying the groundwork for the December Federal Open Market Committee (FOMC) meeting. Powell reiterated that the Federal Reserve is in no rush to cut interest rates. Despite uncertainties in the inflation outlook, the current economic situation is robust, the job market is performing well, and economic growth is exceeding expectations.
He said, "We do not see any urgent signals to cut interest rates. The strong performance of the economy allows us to take a more cautious decision-making approach." He pointed out that the current economic environment does not show clear signs of further inflation rise or economic slowdown, thus enabling the Federal Reserve to achieve its goal through prudent interest rate policies, aiming for a "neutral rate" level that neither stimulates nor restrains economic activity.
Since September, the Federal Reserve has cut interest rates by 0.75 percentage points, with the current federal funds rate target range at 4.5% to 4.75%. However, Powell indicated that due to the still-strong economy, the Federal Reserve will take a more cautious approach to monetary policy in the coming months, observing changes in economic data before making further decisions.
Discussing the relationship between the Federal Reserve and the government, Powell emphasized that the Federal Reserve is an independent institution established by Congress with the mission to achieve maximum employment and price stability, rather than serve any political party or specific outcomes. He clearly stated that the Federal Reserve will not adjust monetary policy due to government debt costs and will continue to focus on its statutory goals.
Powell also responded to the suggestion by fiscal secretary nominee Scott Bessent for the president to announce his successor early, emphasizing the stable institutional relationship the Federal Reserve has maintained with successive governments and looking forward to its continuation.
Regarding inflation, Powell noted that although the inflation level is still above the Federal Reserve's long-term target of 2%, the trend has improved and is expected to continue moving towards the target, though the process may have fluctuations. According to the latest Consumer Price Index (CPI) expectations, November CPI is expected to rise by 2.6% year-on-year, with core inflation (excluding food and energy) expected to rise by 3.3%.
On the job market, Powell mentioned that although economists forecast an addition of 215,000 jobs in November with unemployment remaining at 4.1%, if future employment or inflation data exceeds expectations, the Federal Reserve might adjust its monetary policy path.
Additionally, Powell expressed concerns over the growing federal budget deficit of the United States. Although debt levels have not reached crisis proportions, the current debt growth rate has already outpaced economic growth. If this trend is not controlled, it could impact the long-term stability of the U.S. economy.
The December FOMC meeting will update the Federal Reserve's quarterly economic forecasts, including the interest rate policy path for 2025 and beyond. Current forecasts suggest that the Federal Reserve might cut interest rates by 1 percentage point in 2024 and again by 1 percentage point in 2025. Powell stated that future decisions will be based on the latest economic data and trends, striving to create favorable conditions for the long-term stability of the U.S. economy.
