Companies at the fair were seeking mostly seasonal employees to work in tourism related fields. Job seekers speak with recruiters during a job fair at Navy Pier on Apin Chicago, Illinois. Research suggests the Fed has no choice but to slow the economy further because of the tight labor market’s persistent role in pushing up consumer prices, which could result in an economic slump. Inflation has cooled without a sharp uptick in the unemployment rate, but it remains to be seen whether that could continue. Job openings are down from their peak last year, the rate of quitting has slowed to near pre-pandemic levels, and the share of prime-age workers (those between ages 25 and 54) is at its highest level since 2002. The Fed is highly attentive to the state of the job market, and whether it is coming into better balance. But Powell said Wednesday “we have to be honest about the historical record, which does suggest that when central banks go in and slow the economy to bring down inflation, the results tend to be some softening labor conditions - and so that is still the likely outcome here.” Still, investors are bullish about the end of rate hikes and the Fed’s chances of pulling off a soft landing, a scenario in which inflation slides to the 2% target without the economy sharply deteriorating. The central bank head’s remarks at the Jackson Hole annual economics symposium next month could shed more light on what to expect at the Fed’s monetary policy meeting in September.

“We’ll be asking ourselves does this whole collection of data - do we assess it as suggesting that we need to raise rates further? And if we make that conclusion then we will go ahead and raise rates, so that’s how we’re thinking about the next meeting and how we’re thinking about these going forward,” Powell said. Powell said officials haven’t decided to consider hikes at every other meeting, and that future decisions will hinge on data. It’s possible that a second hike never comes and the Fed decides to move on to the next phase of its inflation fight, which would be to hold rates steady until inflation is defeated. Officials want to retain the option of another rate hike in case inflation proves to be more resilient than expected, but the timing of that final hike is still a question mark.

San Francisco Fed president: 'It's really too early to declare victory on inflation' Mary Daly, president of the Federal Reserve Bank of San Francisco, speaks during a Bloomberg Television interview in San Francisco, California, US, on Thursday, Aug. The Commerce Department releases June figures on Friday. Meanwhile, the core measure inched down to 4.6% from 4.7% during the same period, which was still its lowest level since October 2021. The Fed’s preferred inflation gauge - the Personal Consumption Expenditures price index - rose 3.8% in May from a year earlier, down from the prior month’s 4.3%. The S&P 500 closed flat and the Nasdaq Composite dipped slightly. Stocks closed on a mixed note after Powell’s speech, but the Dow notched its 13th straight day of gains, its longest daily win streak since 1987. “Data dependence remains the buzz word and, given the confusing signals of waning inflation but a tight labor market, keeping all options on the table seems to be a sensible approach,” wrote Seema Shah, chief global strategist at Principal Asset Management, in an analyst note. He also said that core inflation remains “pretty elevated.” “At the margins, stronger growth could lead over time to higher inflation and that would require an appropriate response for monetary policy,” Powell said. In a news conference following the decision, Fed Chair Jerome Powell underscored that another rate hike remains an option - if the economy were to pick up strength and keep upward pressure on prices. Inflation’s steady slowdown in recent months has been encouraging for American consumers and businesses, but officials reiterated in their post-meeting statement that “inflation remains elevated” and that the Fed “remains highly attentive to inflation risks,” suggesting that another rate hike remains on the table.

Here's what happened nextįed officials are estimating one more rate hike this year, according to their latest set of projections. The Federal kept the target range of the federal funds rate unchanged at 5 percent to 5.25 percent, following a slew of 10 consecutive hikes since March 2022. Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., the United States, on June 14, 2023.

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