Federal Reserve Chair Jerome Powell signaled Friday that interest rate cuts are coming soon.
"The time has come for policy to adjust," Powell said in his speech during the Kansas City Fed's symposium in Jackson Hole, Wyoming. "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."
"Inflation is now much closer to our objective, with prices having risen 2.5% over the past 12 months," he said. "After a pause earlier this year, progress toward our 2% objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2%."
Powell said that the high inflation Americans have experienced in recent years was the result of government spending in response to the COVID-19 pandemic.
He acknowledged that the Fed was wrong about inflation being "transitory," and that the high prices have brought "substantial hardship" to many.
The Fed chair said the economy is growing at a steady pace but that it is clear the labor market is cooling.
"We will do everything we can to support a strong labor market as we make further progress toward price stability," he said. "With an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market."
