Powell hints at rate cut this month

"Employment downside risk grows"

Jerome Powell, chairman of the U.S. central bank (Fed), on the 14th (local time) hinted at the possibility of a benchmark interest rate cut at the Federal Open Market Committee (FOMC) regular meeting on the 28th–29th.

At an economic conference held in Philadelphia, Powell did not definitively announce an additional rate cut at the October FOMC regular meeting, but he also did not make remarks that ran counter to market expectations. He said, "There has been no significant change in the economic outlook since last month's meeting," maintaining the existing accommodative stance.

Powell said the Fed is trying to strike a balance between two conflicting risks. He said, "If rates are cut too quickly, we may fail to accomplish the task of stabilizing inflation, and conversely, if they are cut too late, painful losses could occur in the labor market." He added, "There is no longer a 'risk-free path'," explaining, "While prices continue to rise moderately, at the same time the labor market is revealing significant downside risks."

Powell indicated that the Fed's process of asset reduction (quantitative tightening) amounting to $6.6 trillion, which has continued for more than three years, is nearing its end. The Fed has been gradually reducing an asset portfolio that reached $9 trillion since mid-2022. He said, "We may reach that point (an appropriate level of reserves) within a few months."

New York=Park Shin-young, correspondent nyusos@hankyung.com