Jerome Powell Has Dialed Back Expectations On Rate Cuts
Jerome Powell has dialed back expectations on rate cuts. Powell said that firm inflation during the first quarter of 2024 has called into question whether the Federal Reserve will be able to lower interest rates this year. The Chairman of the Federal Reserve’s remarks indicated a clear shift in the Fed’s outlook.
This announcement comes after a third consecutive month of stronger-than-anticipated inflation readings. These inflation readings have derailed hope that the central bank might be able to to deliver pre-emotive rate cuts this summer. Powell says that monetary policy needs to be restrictive for longer.
Powell’s announcement is a quick about face from when he indicated that there was room for rate cuts this year. But part of his indication came with the expectation of declining inflation this year, something that has not materialized. Inflation has continued at its steady rate.
Federal policymakers have said since the start of the year that rate cuts are contingent on gaining “greater confidence” that inflation is moving towards the central bank’s 2% goal, but readings over the past few months show price pressures may even be moving in the opposite direction.
“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell told a forum in Washington. Now the first cut is expected in September and the odds of a second cut are dwindling.
Jerome Powell has dialed back expectations on rate cuts. Unless something changes in the US economy, rate cuts will not happen.
