Powell: risks for inflation from aggressive rate cut
Downside risks to employment have risen and recent price increases reflect tariffs, said Federal Reserve number one
1' min read
1' min read
Fed Chairman Jerome Powell warns that too aggressive interest rate cuts could push inflation up. "If we cut too aggressively, we could leave the work on inflation unfinished and have to reverse course later," Powell pointed out, noting that on the other hand, "if we keep policy tight for too long, the labour market could weaken unnecessarily."
Downside risks to employment have risen and recent price increases reflect tariffs, Powell said, reiterating that there is no risk-free path of monetary policy for the Fed. "Uncertainty about inflation remains high," Powell highlighted.
The Federal Reserve chairman spoke at a conference organised by the US chambers of commerce, a week after the Fed cut interest rates in light of the worsening employment picture.
Unlike the ECB, whose only institutional mandate is to preserve price stability, the Federal Reserve has the dual objective of controlling inflation but also trying to maximise employment levels.
"The increased risks at work have shifted the balance of risks on the achievement of our objectives. This is why we felt it appropriate at our last board meeting to take a new step towards a neutral line," Powell explained.
