Fed Chair Powell cautious on rate cuts, focused on maintaining restrictive policy
From CNBC: 2024-06-12 15:13:00
The Federal Reserve Chair, Jerome Powell, stated that the restrictive monetary policy is showing desired effects on inflation, but it’s too soon to say if it’s sufficiently restrictive.
Even with strong jobs data and a growing economy, Powell is unsure why Americans view the economy negatively. Inflation is high but has decreased significantly.
No one on the Fed committee anticipates interest rate hikes as their base case, focusing on maintaining a restrictive policy and potential cuts in the future.
Powell suggests recent strong jobs data may be slightly overstated and is considering benchmark revisions. Nonfarm payrolls increased, indicating a gradual move towards better balance.
The Fed remains cautious about lowering rates despite cooler-than-expected CPI reports. Powell emphasized the need for more “good data” on inflation to build confidence before loosening policy.
Powell noted that recent inflation readings are showing signs of easing price pressures, with expectations well-anchored to the 2% goal. Inflation has eased considerably from previous peaks but remains high.
An economist predicts that the Federal Reserve will keep rates higher for longer to achieve sustainable progress towards the 2% inflation goal. The economy is slowly converging but sensitive to interest rate changes.
Powell stated that the U.S. economy has made progress towards goals of lowering inflation and maximizing employment. While the labor market has improved, inflation remains too high.
Traders are monitoring how Wednesday’s CPI report influenced the Fed’s projections during Powell’s press conference, looking for signals on possible rate cuts in the future. Powell’s response could indicate the future trajectory of rates.
Stocks maintained gains after the Federal Reserve highlighted “modest” progress on inflation and predicted just one rate cut in 2024. The S&P 500 and Nasdaq Composite remained positive, with the Dow Jones Industrial Average adding 32 points.
Read more at CNBC: Live updates on June Fed rate decision