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By Jon Jackson
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Wall Street rallied on Friday following comments by Federal Reserve Chair Jerome Powell, who said "the time has come" to begin cutting interest rates.
Stock indexes surged with the S&P 500 index nearing a record high, according to Reuters. The Associated Press (AP) reported that the S&P 500 was 1 percent higher after Powell's remarks, while the Dow Jones Industrial Average was up 305 points—0.7 percent—as of 10:05 a.m. ET. The Nasdaq composite was also up, coming it at 1.4 percent higher.
The Federal Reserve began increasing interest rates more than two years ago in an effort to curb inflation. The move was designed to slow the economy by making borrowing expensive for companies and households.
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During a Friday speech at the Fed's annual economic conference in Jackson Hole, Wyoming, Powell did not say how large rate cuts would be or when they would begin, but analysts expect the Fed will announce a quarter-point cut in its benchmark rate when it meets next month.
"The time has come for policy to adjust," Powell said in his Jackson Hole speech. "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."
Reuters reported the early gains in the S&P 500 was less than 1 percent away from beating a record high set in July and comes after dropping 9.7 percent earlier this month from that mark.
The S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average were all on path to reach a second week in a row of gains, Reuters noted.
During his speech at Jackson Hole, Powell said he believes that inflation has become mostly under control.
"Our restrictive monetary policy helped restore balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remained well anchored," Powell said. "Inflation is now much closer to our objective, with prices having risen 2.5 percent over the past 12 months. After a pause earlier this year, progress toward our 2 percent objective has resumed."
He added, "My confidence has grown that inflation is on a sustainable path back to 2 percent."
Elsewhere in his remarks, the Fed chair touched on the labor market.
"We will do everything we can to support a strong labor market as we make further progress toward price stability. With an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to 2 percent inflation while maintaining a strong labor market," Powell said. "The current level of our policy rate gives us ample room to respond to any risks we may face, including the risk of unwelcome further weakening in labor market conditions."
Update 08/23/24 11:56 a.m. ET: This story has been updated to include more information.
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