WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell said Tuesday that U.S. job growth since early last year was not as robust as thought, a hint that the Fed may be ready to keep cutting interest rates to support the economy.
Powell also said the Fed will soon announce plans to buy Treasurys, likely short-term bills, to try to pump more cash into overnight money markets. The goal is to keep short-term rates at their target level and isn’t needed to support the economy, the Fed chairman added.
Downward revisions to the government’s hiring data, announced in August, suggest less upward pressure on wages and inflation.
“Where we had seen a booming job market, we now see more-moderate growth,” Powell said in a speech at an economic conference in Denver.
The Fed raised its benchmark short-term rate four times last year, ending at a range of 2.25% to 2.5%. The reasoning behind these rate hikes was based in part on the notion that brisk hiring would enable workers to secure higher pay, which would ultimately lead to higher inflation. Yet so far, the pace of income gains and price increases has been modest.
Since the start of this year, the Fed has reversed two of those hikes, and investors expect a third rate cut late this month, according to market gauges.
Michael Feroli, an economist at JPMorgan Chase, said Powell’s remarks Tuesday were “consistent with a further easing” of interest rates at the Fed’s Oct. 28-29 meeting.
Powell did not directly address the Fed’s next steps on interest rates. But he said the central bank “will act as appropriate” to support the economy and hiring.
“At present, the jobs and inflation pictures are favorable,” he said. “But there are risks to this favorable outlook,” he added, referring to the U.S.-China trade war and Brexit.
Major overseas economies, such as Germany, are also stumbling.
Powell also acknowledged that the Fed now recognizes that the unemployment rate can fall lower than it previously thought without sparking high inflation. That allows the economy to keep growing and to lead more people to look for and find work.
He also said he did not see signs of an economy overheating.
“This feels very sustainable,” he said.