The Federal Reserve kept its key interest rate at 5.25% to 5.5%, citing “some further progress” toward its 2% inflation goal. At his press conference, Fed Chair Jerome Powell said a rate cut in September is “on the table,” provided the inflation data continues to be encouraging, CNBC reports. The comments propelled stocks to their highs of the day.
Powell said a rate cut at the September meeting would be unrelated to the upcoming presidential election.
He said the central bank would be “absolutely” apolitical if it lowered borrowing costs at the meeting. But the Fed chief also cautioned against assuming that a cut was definitely happening.
“We never use our tools to support or oppose a political party, a politician or any political outcome,” Powell said.
He also said the central bank’s economic forecasts do not take into account who wins the presidency.
“We would never try to make policy decisions based on the outcome of an election that hasn’t happened yet,” Powell said. That would be “a line we would never cross.”
Powell noted November will mark his fourth presidential election at the Fed. He also emphasized that the central bank is a nonpolitical agency.
Stocks surge
The Dow Jones Industrial Average added more than 450 points, or 1.12%, while the S&P 500 jumped as much as 2.12%. The Nasdaq Composite topped 3% at the high.
50 basis-point cut unlikely
Federal Chair Powell seemed to rule out the likelihood of a 50 basis-point rate cut from the central bank.
“I don’t want to be really specific about what we’re going to do, but that’s not something we’re thinking about right now,” he said.
Central Bank monitoring sharper labor market downturn
The central bank is keeping a close eye on the labor market and staying vigilant for signs of a potentially sharp downturn, Fed Chair Powell said.
“We’re watching really carefully for that,” he said during Wednesday’s press conference. “We’re aware of that role, which … I would call it a statistical thing that has happened through history.”
At this point, low unemployment and a low level of layoffs suggest a “normalizing labor market,” the Fed chair noted.