Economic news

In his highly anticipated speech in Jackson Hole, the Federal Reserve chair acknowledged the progress made in cooling down inflation, but said the central bank would not hesitate to raise rates further if needed.

Federal Reserve chair Jerome Powell is expected to tout the economy's brightening prospects while communicating to markets that the central bank's fight against inflation is not yet over in his address at an economic summit in Jackson Hole, Wyo. on Friday.

As consumers' cushion shrinks, they are becoming more dependent on their paychecks to maintain their standard of living. Economists are split on whether wage growth is strong enough to fill the gap.

Key data points have shown price and wage pressures continue to dissipate, which should bolster the case for an end to rate increases, but strong labor-market activity may keep policymakers uneasy.

Tighter credit standards and lower demand for business loans could make it harder for the Fed to achieve the soft landing it's seeking. Still, bankers are cautiously optimistic, noting that some businesses are using their savings to invest at a time when borrowing costs are high.

Community bankers anticipate that interest rates could soon level off and the broader economy may avert a downturn as a result. If that forecast proves true, lenders could minimize credit losses and enjoy stronger loan demand than they had expected earlier in the year.

The central bank might be able to avoid a recession, but must not sacrifice the economic well-being of communities harmed the most by high interest rates.

Moody's said higher funding costs, a potential decline in bank capital and growing risk in the commercial real-estate industry prompted many of the downgrades.

Federal Reserve Bank of Richmond President Thomas Barkin said the greater-than-expected easing in inflation in June may be an indication that the U.S. economy can have a "soft landing," returning to price stability without a damaging recession.

"I haven't made up my mind for what should happen in September," Goolsbee said.