Fed's Mouthpiece: Powell's Shift Suggests Rate Cut is Approaching

"Federal Reserve mouthpiece" Nick Timiraos pointed out in The Wall Street Journal that Federal Reserve Chairman Powell has made a subtle but important shift, bringing the Fed closer to cutting interest rates. He stated on Tuesday that further cooling of the labor market might be undesirable.

"High inflation is not the only risk we face," Powell said on the first day of his two-day testimony to the Senate Banking Committee on Tuesday. "We have seen significant cooling in many aspects of the labor market, and it is no longer a source of broad inflationary pressure for the economy."

This assessment is noteworthy because Federal Reserve officials have long believed that an overheated labor market is a major risk in suppressing inflation. Powell admitted he would not have made such a judgment two months ago. In fact, before the U.S. Department of Labor released its June employment report, Powell's comments at a meeting held last week in Portugal were more cautious.