Stocks slid Monday after Federal Reserve Chairman Jerome Powell said that future interest rate cuts would depend on economic data during his appearance at the National Association of Business Economics. While Powell noted inflation is moving closer to the Fed’s 2% target and highlighted positive economic progress, his comments on data-driven rate decisions added uncertainty to the market just weeks after a recent rate cut.
What Happened: Powell appeared at the National Association of Business Economics (NABE) in Nashville, Tennessee, where he gave prepared remarks and took part in a fireside conversation sharing details on the recent interest rate cut, inflation, the housing market and what's next for the Fed in November.
"Our economy is strong overall and has made progress," Powell said.
Powell said "inflation has eased" and "labor market conditions are solid."
The Fed Chairman said inflation is on a sustainable path back to 2%, and the recent 50-basis point rate cut shows growing confidence in the goal.
"Our focus was on bringing down inflation."
Powell said the Fed's patient approach to rate cuts "has paid dividends."
Speaking on the labor market, Powell said the strength of the labor market "can be maintained" and that unemployment rates are well within estimates.
"Over the past year, we have continued to see solid growth and healthy gains in the labor force and in productivity."
Powell said one of the Fed's main goals is not to have higher unemployment, as they bring inflation down.
"We have made a good deal of progress."
What's Next: Powell said the Federal Reserve is not on a pre-set course to decide on further rate cuts at the November meeting.
"Overall, the economy is in solid shape. We intend to use our tools to keep it there," Powell said.
The Fed Chairman said decisions will be made on a meeting-by-meeting basis.
Powell said the goal is to see income and savings rates go up after it appears that consumers are spending more than their income.
For future interest rate cuts, Powell said the process will play out over time and does not need to happen fast.
"Will depend on the data."
Powell said the rate cuts can happen slower or faster depending on how the economy moves.
Ahead of the November meeting there will be several key pieces of data, which include reports on inflation and unemployment. Powell said the Fed will "take everything into account."
"Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance."
Market Reaction: The stock market dripped slightly, following Powell's comments. The SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500, was trading around $571.12 at the time Powell began talking and is trading at $570.50 at the time of publication.
The Invesco QQQ Trust QQQ trades at $485.03 at the time of writing, down 0.35% on the day.
The SPDR Dow Jones Industrial Average ETF DIA is down 0.44% to $421.08 at the time of publication Monday.
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