Monetary policy Fed Chairman Powell sees time for interest rate cuts soon

The head of the US Federal Reserve, Jerome Powell, has held out the prospect of interest rate cuts soon. "The time has come to adjust policy," Powell said at the central bank conference in Jackson Hole in the US state of Wyoming.

Powell did not name a date, but market observers assume that a rate cut is likely to be made at the Fed meeting in September. "The direction is clear, and the timing and pace of rate cuts will depend on incoming data, evolving forecasts and the balance of risks," Powell said.

Fight against inflation not over, but progress

With regard to inflation, Powell emphasized that the fight against the rapid rise in consumer prices was not yet over, but that "great progress" had been made. With an "appropriate" easing of monetary policy, there is good reason to believe that the inflation rate will fall to the Fed's target of 2 percent and that the labor market will remain strong at the same time. Inflation in the USA weakened unexpectedly in July. Consumer prices rose by 2.9% compared to the same month last year.

The Federal Reserve last lowered the key interest rate in March 2020 - to boost the economy during the onset of the coronavirus pandemic. After that, interest rates initially remained at the zero mark - until the Fed began raising rates at a record-breaking pace in March 2022 and raised them to their current level a year ago.

Commercial banks can borrow central bank money at the Fed's interest rate. This means that an interest rate cut also makes loans cheaper for consumers and companies. The key interest rate is currently at its highest level for more than 20 years with a range of 5.25 to 5.5 percent.