Federal Reserve Chairman Jerome Powell said Wednesday that inflation is on a “bumpy” trajectory to 2% and that central bank officials expect to cut interest rates “at some point” this year. I doubled my point of view.
Powell also reiterated that the Fed will remain independent during this competitive election year, noting that the Fed's analysis is free of “any personal or political bias.”
Powell's comments on inflation are the second time in the past week that he has offered assurances that the overall outlook has not changed much, despite tougher-than-expected readings at the start of the year.
Powell said in a speech at Stanford University on Wednesday that such statistics “do not significantly change the picture, with continued strong growth, a strong but rebalancing labor market, and a sometimes bumpy road ahead.” “It doesn't really change the overall picture, which is that inflation is moving down towards 2%.” University.
A new inflation report released Friday showed the Federal Reserve's preferred inflation measure, the Personal Consumption Expenditure Index, has cooled slightly. Last Friday, Chairman Powell said the PCE results were “certainly in line with what we would like to see.”
The PCE reading followed more solid inflation data in January and February from other indicators such as the Consumer Price Index. These results raised concerns among some market participants about the pace of interest rate cuts in 2024.
The Fed decided last month to keep interest rates on hold, maintaining its median forecast for three cuts this year. But nine officials expected fewer than two cuts this year.
On Wednesday, the chairman reiterated his expectations for rate cuts this year, saying, “If the economy broadly develops as we expect, most FOMC members believe it may be appropriate to begin lowering policy rates at some point this year.'' I think it's highly sexual,” he said.
But at this point, it is “too early” to tell whether the prevailing forecasts for inflation are for more than just a “spike,” and officials are not confident that inflation will fall definitively to 2%. He reiterated that he does not expect to cut interest rates until he gets more. .
“Given the strength of the economy to date and the development of inflation, there is time for future data to guide policy decisions,” Powell said.
Three other Fed officials, Cleveland Fed President Loretta Mester, San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsby, have said in recent weeks that three more rate cuts are expected in 2024. At the same time, the Federal Reserve announced that it would continue to cut interest rates. There is no need to rush to ease monetary policy.
Mester said on Tuesday he would not rule out a rate cut as early as June. Traders are currently making the same bet, but the odds have been shaken by rising inflation statistics in recent months.
One of the officials, Rafael Bostic, said he expected there would be only one rate cut in the fourth quarter.
Both sides are trying to influence Mr. Powell and the Fed as the November election approaches.
Democrats tend to want cuts as quickly as possible, while Republicans generally want Mr. Powell to move slowly.
Strategies for pushing these issues home can vary widely, but politicians agree that an election year is a key dynamic: Cutting interest rates before the election means that's what Mr. Powell intended. Regardless, it will likely be beneficial to President Joe Biden and the White House.
As a result, Democratic lawmakers tend to openly advocate lowering interest rates. Even Mr. Biden, who often avoids public conversations about monetary policy, showed some interest recently by suggesting that the “little organization that sets interest rates” will soon lower them.
“I can't guarantee it, but I'm sure we will,” he said in March when discussing various ways to help homeowners facing high costs.
Meanwhile, most Republicans have made it clear they hope the Fed doesn't cut rates “prematurely” while pleading with Powell to ignore the political noise. Donald Trump has taken a more confrontational stance, suggesting Powell wants to “help Democrats” in the coming months.
Chairman Powell went out of his way on Wednesday to make it clear that the Fed's decisions are not influenced by elections.
“Fed policymakers work for long periods of time, out of sync with election cycles,” Powell said. “This independence allows and requires monetary policy decisions to be made without consideration of short-term political issues,” he said.
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