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federal reserve chairman jerome powell recently said that the bank will gradually lower interest rates "over time," while once again emphasizing that the overall u.s. economic condition remains solid.

at the national association of business economics (nabe) annual meeting in nashville, powell reiterated his confidence that inflation will continue to move closer to the central bank's 2% target, adding that economic conditions have "set the stage for further easing of price pressures" foundation”.

powell said: "looking forward, if the economy develops generally as expected, (monetary) policy will shift to a more neutral stance over time." neutral monetary policy will neither promote too rapid economic growth nor it will not inhibit economic activity.

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two weeks ago, the federal reserve announced a 50 basis point interest rate cut, lowering the federal funds rate target range from 5.25%-5.5% to 4.75%-5%. this is also the bank's first interest rate cut since march 2020, which means the beginning of the monetary easing cycle.

at the same time as the interest rate decision was announced, the "dot plot" of interest rate forecasts released by the federal reserve showed that the median of 19 policymakers' expectations for long-term interest rates fell between 2.75% and 3%, which is 200 basis points lower than the current level.

policymakers also generally expect the fed to cut interest rates by a cumulative 50 basis points in 2024. but powell noted that "we have not set any predetermined course" and that policymakers will continue to make decisions on a case-by-case basis based on the latest economic data.

powell also said that the u.s. labor market is solid, but the situation has indeed "cooled significantly over the past year." "we do not believe that we will need to see a further cooling of the labor market to achieve the 2% inflation goal."

data released last week showed that the annual rate of the u.s. pce (personal consumption expenditures) price index slowed to 2.2% in august. "the fall in inflation is broad-based and recent data suggests we are making further progress towards a sustainable return to 2 per cent."

at the same time, some central bankers remain concerned that cutting interest rates too quickly could reignite inflationary pressures. in this regard, powell said: "our goal all along has been to restore price stability, but also to prevent a significant increase in unemployment."

"while the job is not yet accomplished, we have made considerable progress on the path to achieving this goal." powell acknowledged that housing-related inflation has declined at a slower pace, but he is confident that over time the trend will also will be further slowed down.