Chairman Powell Still Sees Room For The Fed To Cut Rates This Year
Chairman Powell still sees room for the Fed to cut rates this year. This is despite stronger than anticipated economic activity this year. The Federal Reserve’s broad expectation is that declining inflation will allow for interest-rate cuts this year.
Powell pointed to signs that the labor-market conditions are less tight than they have been in recent years. This view has eased concerns that paychecks and prices might rise together in tandem. There have been signs of firmer-than-expected inflation. But they haven’t shaken the Fed’s stance that price growth will continue to slow.
Fed officials raised rates rapidly over the past two years to address a surge in inflation, which hit a 40 year high. They’ve held their benchmark short-term rate in a range between 5.25% and 5.5% since July. Measures of underlying inflation have cooled since the middle of 2023. This has allowed the Fed to shift away from increasing interest rates.
“As progress on inflation continues and labor-market tightness eases, these risks continue to move into a better balance,” Powell said. There is more stability in the market now than there was in the last couple years. But we are far from out of the woods. Political fights, on everything from student loans, to taxes, to the border, can upset the market.
This topic has been one of concern for many people. Inflation has been crushing, and therefore, actions to curb it are essential. But doing so by raising interest rates have made it much more difficult to buy homes. Finding a solid middle ground is difficult.
Chairman Powell still sees room for the Fed to cut rates this year. Will he follow through? It really depends on how events play out in the future.
