SINTRA, Portugal, July 2 - The U.S. is back on a"disinflationary path," Federal Reserve Chair Jerome Powell said on Tuesday, but policymakers need more data before cutting interest rates to verify that recent weaker inflation readings provide an accurate picture of the economy.
"I think the last reading ... and the one before it to a lesser suggest that we are getting back on the disinflationary path," Powell said."We want to be more confident that inflation is moving sustainably down toward 2% ... before we start ... loosening policy." "You can't know that with precision," Powell said,"but it is understood that we have two-sided risks."
The unemployment rate, while low by historical standards, has risen steadily from 3.4% in April of 2023 to 4% as of May. The U.S. Labor Department will release the monthly employment data for June on Friday. Goolsbee and others have argued that at some point falling inflation should trigger lower interest rates to keep the inflation-adjusted"real" cost of borrowing from increasing.