Speed of interest rate cuts at mercy of labour market

Economists keeping eye on Friday’s speech for hints

- CHRISTOPHER RUGABER

U.S. Federal Reserve chair Jerome Powell will likely provide insight about how the Fed sees the economy and what its next steps may be in a high-profile speech Friday at an annual conference of central bankers.

Federal Reserve officials have said they’re increasingly confident they’ve nearly tamed inflation. Now, it’s the health of the job market that’s starting to draw their concern.

With inflation cooling toward its two per cent target, the pace of hiring slowing and the unemployment rate edging up, the Fed is poised to cut its benchmark interest rate next month from its 23-year high. How fast it may cut rates after that, though, will be determined mainly by whether employers keep hiring. A lower Fed benchmark rate would eventually lead to lower rates for auto loans, mortgages and other forms of consumer borrowing.

Chair Jerome Powell will likely provide some hints about how the Fed sees the economy and what its next steps may be in a high-profile speech Friday in Jackson Hole, Wyoming, at the Fed’s annual conference of central bankers.

It’s a platform Powell and his predecessors have often used to signal changes in their thinking or approach.

Powell will likely indicate the Fed has grown more confident inflation is headed back to the two per cent target, which it has long said would be necessary before rate cuts would begin.