Stock market today: S&P 500, Nasdaq close at record highs as Powell touts inflation

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

While still showing signs of caution, Powell admitted the data has been in the right direction recently.

Yahoo Finance’s Jennifer Schonberger reports:

Powell said Tuesday that he is encouraged by cooler inflation but reinforced that the central bank will need to see more evidence before cutting interest rates.

The last two inflation readings in April and May “do suggest that we are getting back on a disinflationary path,” Powell said speaking on a panel in Portugal for a European Central Bank conference.

Powell’s comments come days after the latest reading of 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-over-month basis, the inflation measure rose 0.1%, also in line with expectations and down from 0.2% in April.

The reading offered new support for rate cuts later this year, easing concerns that mounted during the first quarter that hotter-than-expected inflation could upend plans for a loosening of monetary policy in 2024.

Despite another positive signal that inflation is easing, the central bank isn’t likely to cut rates at its next meeting in late July.

Powell declined to answer a question about whether the Fed could cut as soon as September.

Instead, he underscored the Fed will need more time and evidence that inflation is moving sustainably down to its 2% target, noting that the central bank can afford to be patient given a strong job market that is cooling gradually.

“We’ve made a lot of progress,” said Powell. “We just want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation.”