Powell suggests Fed could have cut rates at July meeting

New Delhi

Fed Chair Jerome Powell said on Wednesday that the US central bank may have started to cut interest rates in late July had it realised that the labour market was cooling this quickly.

"If you ask, you know, if we'd gotten the July report before the meeting, would we have cut? We might well have," Powell told a news conference after the central bank cut its benchmark overnight interest rate by 50 basis points, more than most analysts had expected. "We didn't make that decision, but you know, we might well have."

Powell said the policy decision unveiled by the Fed on Wednesday doesn't mean it is behind the curve; it's a commitment not to be.

The Labor Department's jobs report for July, out days after the Fed's July 30-31 meeting, showed the unemployment rate had risen to 4.3 per cent and job growth had slowed.

Although the report for August that followed showed unemployment ticking down 4.2 per cent, it was abundant with further proof of deceleration.

"It seems like the Fed wanted to catch up from not going in July," Oscar Munoz, an economist at TD Securities, said after the release of the latest policy decision.

From here, Munoz said, the Fed is in no rush, a point that Powell also made in his post-meeting news conference.

Fed policymakers are nearly evenly split on whether they feel they will need to deliver another 50 basis points of rate cuts over the last two meetings of the year, or should stick to less.

To date, said Powell, the labour market is strong and inflation is on track to move down to 2 percent. Wednesday's rate cut is an attempt to keep it that way.

"The Fed doesn't like to admit policy errors, but some of the decision for a larger initial cut is likely to get caught up as it found itself behind the curve by one meeting," said Ryan Sweet, chief U.S. economist at Oxford Economics. "The September decision is a preemptive strike to increase the odds that the central bank can pull off a 'soft landing.'