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Chair Jerome Powell has stated on Monday that the Federal Reserve is increasingly confident that inflation is on track to reach its two per cent target.
He also mentioned that the Fed would consider cutting rates before the pace of price increases reaches that level.
"We've seen three positive readings, and when you average them out, it's a promising trend," Powell remarked during a Q&A session at the Economic Club of Washington.
He added that the figures "somewhat increase confidence" that inflation is slowing down in a sustainable manner.
Powell did not provide any indication of when the first rate cut might take place.
However, most economists anticipate the first cut to occur in September.
After Powell's comments, Wall Street traders raised their expectations of a rate reduction from its 23-year high. The futures markets are also anticipating additional rate cuts in November and December.
"Today, I'm not going to signal any specific meeting," Powell stated.
If the Fed were to reduce rates, it would eventually lower borrowing costs for consumers, including mortgages, auto loans, and credit cards.
Last week, the government reported a slight decline in consumer prices from May to June, bringing the year-over-year inflation rate down to 3% from 3.3% in May.
"Core" prices, which exclude volatile energy and food costs and provide a better indication of future inflation trends, increased by 3.3% from a year earlier, slightly below the 3.4% recorded in May.
In his remarks, Powell emphasised that the Fed did not need to wait until inflation actually reaches 2% to reduce borrowing costs.
"If you wait until inflation reaches all the way down to 2%, you've probably waited for too long," Powell explained, highlighting that it took time for the Fed's policies to take effect.
AP News
