Powell pleased with progress in reducing inflation

Federal Reserve Chairman Jerome Powell today pointed to several economic indicators suggesting progress in the Fed’s goal of lowering inflation to its 2% target, although he added that “meaningful” monetary policy tightening isn’t out of the question.

During a speech in New York City, Powell noted that PCE (personal consumption expenditure) inflation was estimated at 3.5% in September, down from a peak of 7.1% last year. Core inflation was estimated at 3.7%, down from 5.6% at its peak. That declining inflation did not come at the cost of higher unemployment, “a highly welcome development, but a historically unusual one,” he said. Still, Powell cautioned that reaching the Fed’s 2% goal will likely require a period of below-trend growth and softening in labor market conditions.

“My colleagues and I are committed to achieving a stance of policy that is sufficiently restrictive to bring inflation sustainably down to 2% over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective… Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said.