Fed Chair Powell Underscores That More Rate Cuts Are Coming

Jerome H. Powell, the chair of the Federal Reserve, underscored on Monday that officials are likely to lower interest rates in the coming months as the job market slows and inflation cools “significantly.”

Fed officials lowered interest rates by half a percentage point at their meeting on Sept. 18, the first reduction in more than four years. Policymakers usually lower borrowing costs in quarter-point increments, so that was an unusually large decrease.

The move came as the Fed made notable progress in its fight against rapid inflation. Price increases have slowed substantially since their 2022 peak, which meant that the high interest rates the Fed had maintained since mid-2023 were no longer seen as necessary.

“Inflation has moved down, and unemployment has moved up, in both cases significantly,” Mr. Powell explained Monday, in the text of a speech prepared for delivery at a meeting of business economists in Nashville. “It was time for a recalibration of our policy stance to reflect progress toward our goals as well as the changed balance of risks.”

The question now is how quickly central bankers will ease off in the months ahead. Rates remain at around 4.8 percent, which is much higher than the level most economists think is necessary to keep the economy growing steady over time. That level is sometimes referred to as a “neutral rate” or a “neutral policy stance.”

“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance,” Mr. Powell said. “But we are not on any preset course.”