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Inflation is now in “a pretty good place” as the latest economic data shows it returning to the Federal Reserve’s target of  2%, Fed Chair Jerome Powell said yesterday (Reuters, subscription).

What’s going on: Speaking at the Economic Club in Washington, “Powell said on Monday the three inflation readings over the second quarter of this year ‘add somewhat to confidence’ that the pace of price increases is returning to the Fed’s target in a sustainable fashion, remarks that suggest a turn to interest rate cuts may not be far off.”

• Consumer prices in Q2 rose at an annualized rate of 2.1%, excluding food and energy costs.
• Policymakers are increasingly worried that prolonged higher interest rates are slowing the economy and causing rising unemployment.

​​​​​​​ Why it’s important: “The betting among investors has tilted strongly towards the Fed starting rate cuts in September. Changes to the policy statement in July could provide a strong signal of that by updating how inflation is described and assessing how recent data has added to policymakers’ confidence that the pandemic-era outbreak of inflation has subsided.”

However … Powell cautioned that his comments shouldn’t be taken to mean anything with regard to a rate decision at the Fed meeting later this month (The Wall Street Journal, subscription). 

• “I’m not going to be sending any signals one way or another on any particular meeting,” he said during a question-and-answer session. “We’re going to make these decisions meeting by meeting.”