Federal Reserve Chair Jerome Powell recently spoke at a House Financial Services Committee hearing in Washington, U.S., stating that there will not be any interest rate reductions in the near future. This has prompted Wall Street to question whether the central bank will cut rates at all this year. Powell mentioned that there has been a lack of progress in lowering inflation to the Fed’s target of 2%, indicating that it may take longer than anticipated to adjust policy.
Market expectations for rate cuts have been fluctuating, with traders currently pricing in a 71% probability of a rate cut in September. Some economists predict two rate cuts, one in September and another in December, while others foresee only one cut later in the year. The uncertainty surrounding rate cuts has led to a debate about potential policy mistakes and the impact on the economy, particularly on labor market stability and the finance sector.
Overall, the Fed’s cautious approach to rate cuts has generated mixed reactions among analysts and investors, with varying opinions on the timing and necessity of such actions.
Federal Reserve Chair Jerome Powell recently indicated that interest rate reductions are unlikely in the near future due to a lack of progress in lowering inflation to the Fed’s 2% target. Most inflation readings hover around 3%, making it difficult for the Fed to ease policy. Market expectations for rate cuts have been volatile, with some predicting no cuts until 2025. However, some still hope for rate cuts later this year if inflation data improves. A Fed policy mistake, such as keeping rates too high for too long, could pose risks to the economy and financial sector.
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