Federal Reserve's Cautious Approach to Rate Cuts Amid Economic Concerns
- The Federal Reserve plans to cut the benchmark interest rate by 0.25 percentage points in November and December.
- This decision is influenced by concerns about potential inflation and the current state of the labor market.
- Powell's cautious approach suggests a belief in achieving a soft landing for the economy without aggressive rate cuts.
In the United States, Federal Reserve Board chairman Jerome Powell announced a cautious approach to interest rate cuts, planning to reduce the benchmark rate by 0.25 percentage points in both November and December. This decision comes in response to concerns about the economy potentially overheating, which could reignite inflation. While some economists advocate for more aggressive cuts of 0.50 percentage points to stave off a recession, Powell believes that the current economic indicators, including inflation nearing the 2 percent target and a healthy labor market, suggest a soft landing is achievable. The Fed's strategy reflects a careful balancing act between stimulating growth and preventing inflation from rising too quickly. Powell's outlook indicates a belief that the neutral interest rate, which neither restricts nor stimulates the economy, will be reached without drastic measures.