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Friday, June 21, 2024

Jerome Powell Signals Potential Rate Cuts This Year

Key Takeaways:

  • The Federal Reserve may begin lowering its policy rate later this year if the economy evolves as expected.
  • The Fed remains data-dependent and prepared to start cutting rates later this year if inflation continues to cool and the labor market shows signs of rebalancing.

Powell noted that inflation has come down significantly over the past year but remains above the Fed’s 2 percent target. Recent data showed higher-than-expected job gains and inflation readings. Jerome Powell stated, “It is too soon to say whether the recent readings represent more than just a bump.”

Powell signaled that the Fed may begin lowering its policy rate later this year if the economy evolves as expected. However, it could be some time before this happens, as Powell puts it, “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”

Reducing rates too soon or too much could result in a reversal of progress on inflation while easing policy too late or too little could weaken economic activity and employment. Powell said that monetary policy is well-positioned to confront either of these risks.

Powell’s speech could confirm that it is prepared to start cutting rates later this year if inflation continues to cool and the labor market shows signs of rebalancing. The CME Fed watch tool currently expects a rate cut in June with a 58% chance:

CME Fed watch Tool. Source: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

In a speech from Governor Waller last week, there is no rush to cut interest rates until there are signs of the economy cooling.

Lazarus
Lazarushttps://ljlnews.com
Publisher and editor of LJLNews. I am a Stock Market enthusiast, with an interest for politics. I hope you enjoy reading the articles! Contact me at: Lazaruslucas@ljlnews.com

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