S&P 500, Nasdaq close at record highs as Powell praises progress on inflation

Federal Reserve Chairman Jerome Powell spoke publicly for the first time on Tuesday since the Fed’s preferred inflation gauge showed prices rose at the slowest pace in more than three years during the month of May.

While still signaling caution, Powell acknowledged that recent data had moved in the right direction.

Yahoo Finance’s Jennifer Schoenberger reports:

Powell said Tuesday he was encouraged by moderating inflation, but he also stressed the central bank would need to see more evidence before cutting interest rates.

Powell, addressing a panel at the European Central Bank’s conference in Portugal, said the last two inflation data in April and May “suggest that we are getting back on the path of low inflation.”

Powell’s comments came just days after the latest data for the Fed’s preferred inflation target – the “core” personal consumption expenditures (PCE) index – rose 2.6% in May, in line with expectations and down from 2.8% in April.

On a month-on-month basis, the inflation rate increased by 0.1%, which was in line with expectations and lower than 0.2% in April.

The data provided fresh support for interest rate cuts later this year, easing concerns raised during the first quarter that higher-than-expected inflation could impact plans to ease monetary policy in 2024.

Despite another positive sign of easing inflation, the central bank is unlikely to cut interest rates at its next meeting in late July.

Powell declined to answer a question about whether the Fed could cut interest rates by September.

Instead, he emphasized that the Fed will need more time and evidence that inflation is sustainably coming down to its 2% target, saying the central bank can be patient given a strong job market that is slowly cooling off.

“We’ve made a lot of progress,” Powell said. “We just want to get a sense that the levels we’re seeing are a true indication of what’s really happening with underlying inflation.”

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