In a recent address, the Chairman of the Federal Reserve, Jerome Powell, hinted at a potential slowdown in inflation, paving the way for a decrease in interest rates. According to Powell, the economy is expected to perform as anticipated, with two more rate cuts of 50 basis points projected for the remainder of the year. However, he emphasized that the Fed is not bound by a predetermined course and will make decisions on a meeting-by-meeting basis, taking into account the two-sided risks at play.
Powell’s remarks seemed to temper expectations, leading to a mixed market reaction. Stocks experienced a slight decline, while bond yields rose. The dollar index saw a moderate gain. Analysts weighed in on the Fed Chair’s comments, with some interpreting them as a signal for a more gradual approach to rate reductions.
One expert noted that Powell’s “over time” phrase may have dampened market enthusiasm for rapid rate cuts, leading to a repricing of expectations. Another analyst observed that the Fed does not appear to be in a hurry to cut rates quickly, which may have taken a 50-basis-point cut by year-end off the table.
Despite this, Powell’s comments were seen as generally positive, with some analysts highlighting the Fed Chair’s emphasis on solid economic fundamentals and a labor market that remains strong. The suggestion is that the Fed is likely to implement another rate cut at its November meeting, pending the release of new data.
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