Powell Hints at Rate Cut

Powell Hints at Rate Cut

 
Federal Reserve Chair Jerome Powell hinted at potential interest rate cuts in the near future, citing significant progress in reducing inflation towards the Fed's 2% target. However, he refrained from specifying when these cuts might occur.

 
During his remarks to Congress, Powell noted that both inflation and economic activity have slowed in line with the central bank's expectations. He expressed confidence that recent data from April to June indicates a return to target inflation levels after earlier concerns.

 
Despite this progress, Powell did not confirm whether this would justify lowering interest rates at the Fed's upcoming meeting on July 30-31. Investors largely anticipate that the central bank will begin reducing rates at its following meeting in September.

 
“I’m not going to be sending any signals one way or another on any particular meeting,” Powell stated, emphasizing that decisions will be made on a meeting-by-meeting basis.

 
Labor market conditions have cooled steadily, and inflation resumed its slowdown in the second quarter, strengthening the case for rate cuts to prevent unnecessary economic weakening. Last July, the Fed raised its benchmark rate to its highest level in over two decades to combat high prices.

 
Chicago Fed President Austan Goolsbee highlighted concerns that maintaining current rates could lead to an overly tight policy stance, given the substantial drop in inflation since the rate was set.

 
Powell’s comments were significant, coming just after a mild June inflation reading and before the central bank's quiet period ahead of its July meeting. While a September rate cut is widely anticipated, some economists suggest that recent improvements in inflation might justify an earlier cut.

 
The likelihood of a rate cut in July was low, with odds around 13% before Powell's remarks and dropping to around 7% afterwards, according to interest-rate futures prices from CME Group.

 
In addition to economic updates, Powell expressed gratitude that injuries to former President Donald Trump were not more severe following an assassination attempt. He condemned political violence and emphasized its unacceptable nature in society.