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FED CHAIRMAN CONFIRMS POLITICAL INDEPENDENCE AHEAD OF ELECTIONS

FED CHAIRMAN CONFIRMS POLITICAL INDEPENDENCE AHEAD OF ELECTIONS

WASHINGTON, July 11 (Bernama-Xinhua) — U.S. Federal Reserve Chairman Jerome Powell reiterated on Wednesday that the central bank bases its decisions on economic data and not political factors. The central bank is expected to cut interest rates before the Nov. 5 elections.

“We make our decisions based on economic data, changing outlooks and risk balance. We don’t take into account other things, other factors, including political factors,” Powell said in response to a question during a House Financial Services Committee hearing.

“We don’t look at things like election cycles. We don’t look at any of those things. We look at the data,” the Fed chairman said.

The Fed’s next meeting is scheduled for July 30-31. Authorities are expected to leave key interest rates unchanged at the 22-year high of 5.25-5.5 percent, which was approved in July last year.

The Chicago Mercantile Exchange (CME) Group’s FedWatch Tool, which serves as a barometer of market expectations for the Fed funds rate, showed the probability of the Fed keeping rates unchanged at its July meeting at more than 95 percent on Wednesday. The probability of a rate cut at its September meeting is 70 percent.

Powell indicated that the Fed is moving closer to a decision to cut rates, but that more confidence in inflation’s progress is needed before taking such action.

“We want to have more confidence, we want to have more trust, and that means more positive inflation numbers that inflation comes down to 2 percent in a sustainable way,” he said.

The U.S. personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation, rose 2.6 percent in May from a year ago, still above the central bank’s long-term inflation target.

Powell also stressed the central bank’s dual mandate of price stability and maximum employment. “I would say we’re now at a point where the risks to the two mandates are much more balanced than they were,” he said.

“That means it’s not just about reducing inflation. The job is not done yet on inflation. We have more work to do there, but at the same time we have to take into account the labor market. So we have seen a significant easing of the labor market,” he noted.

The latest monthly jobs report showed the U.S. unemployment rate rose to 4.1 percent in June, up from 3.6 percent a year earlier.

In minutes of the June policy meeting released last week, U.S. Federal Reserve officials cited “a clear deterioration in labor market conditions” as a significant downside risk to economic activity.

On Tuesday, Powell attended a hearing before the Senate Banking, Housing, and Urban Affairs Committee. Over the course of two days, he presented the Semiannual Monetary Policy Report to Congress, appearing before both the Senate and House committees.

–BERNAMA-XINHUA


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