US Markets
Wednesday, March 6th, 2024 3:34 pm EDT
Key Points
- Federal Reserve Chair Jerome Powell expects interest rates to decrease this year but hasn’t specified the timing.
- Powell emphasized policymakers’ cautious approach to inflation risks and the need for data assessment before rate adjustments.
- Despite market expectations for rate cuts, Powell noted that the Fed’s policy rate may have peaked, cautioning against premature easing and highlighting the importance of maintaining progress against inflation while avoiding economic slowdown.
Federal Reserve Chair Jerome Powell reiterated during congressional appearances his expectation of interest rates declining this year but refrained from specifying when. Powell emphasized policymakers’ caution regarding inflation risks, stating that any adjustments to the policy rate target range would be contingent on data assessment, the evolving outlook, and risk balance. He echoed the Federal Open Market Committee’s stance that rate reduction would only occur with increased confidence in sustainable inflation movement towards 2 percent. Powell highlighted the Fed’s commitment to monitoring economic progress and avoiding premature easing. While acknowledging the likelihood of reaching the peak in policy rates for the tightening cycle, Powell emphasized the uncertainty of economic projections and the importance of avoiding hasty rate adjustments. He cautioned against overly rapid rate decreases, citing the risk of exacerbating inflationary pressures, and underscored the potential adverse effects of delaying rate cuts on economic growth. Market expectations for aggressive Fed easing have shifted following the Fed’s cautious approach and indications that rate cuts are not imminent. Despite resistance to immediate rate cuts, Powell noted progress towards inflation goals without destabilizing the labor market or broader economy. Inflation has moderated notably, reflecting improvements in both goods and services prices, with longer-term inflation expectations remaining anchored. Powell’s congressional testimony coincides with heightened political pressures, particularly during a presidential election year, with former President Trump and some Democrats advocating for rate cuts for differing reasons.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/03/06/powell-reinforces-position-that-the-fed-is-not-ready-to-start-cutting-interest-rates.html
