Reserve Dollar

2024

Jerome Powell

Chair

Reserve

Federal Reserve Chair Jerome Powell stated that the US economy hasn’t progressed enough to meet the central bank’s 2% inflation target. This raises doubts about the possibility of interest rate cuts shortly. 
According to the inflation data from the first three months of 2024, Powell stated, “The recent data have not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence” during a central banking symposium. 
Financial markets were expecting a more dovish central bank posture, so they were disappointed by the Fed Chair’s remarks. Traders in the fed funds futures market earlier this year priced in up to six or seven rate cuts in 2024, beginning as early as March. 
Once the economic data came in, estimates had to be lowered. Now, the market is only anticipating one or two quarter-percentage-point declines, and those won’t happen till September, at the latest. 
<h2 class="wp-block-heading" id="strong-inflation-has-not-progressed-sustainablely-strong">Inflation Has Not Progressed Sustainablely</h2> 
Powell’s comments highlight the Fed’s ongoing battle to control inflation, which has been more tenacious than initially thought. Despite the central bank’s aggressive series of 11 consecutive rate hikes in March 2022, the most recent consumer price index (CPI) reading for March 2024 showed inflation running at a 3.5% annual rate—well above the Fed’s 2% target. 
“We’ve said at the [Federal Open<a href="https://www.thecoinrepublic.com/2024/04/17/top-4-nfts-by-market-cap-a-closer-look-at-their-analytics/" target="_blank" rel="noreferrer noopener"> Market </a>Committee] that we’ll need greater confidence that inflation is moving sustainably towards 2% before [it will be] appropriate to ease policy,” Powell said. 
The Fed Chair’s comments indicate that the current policy level, with the benchmark interest rate in a target range of 5.25%- 5.5%, is likely to remain in place until inflation shows more substantial progress towards the central bank’s goal. 
<figure class="wp-block-image size-large is-resized">
 <a href="https://w3wc.io/?no"><img decoding="async" src="https://www.thecoinrepublic.com/wp-content/uploads/2024/04/freecompress-1440x90-gif-1-1.gif" alt="" style="width: 100%;height:auto"></a>
</figure> 
<h3 class="wp-block-heading" id="strong-implications-for-financial-markets-strong">Implications For Financial Markets</h3> 
The Fed’s hesitation to ease monetary policy has already damaged financial markets. The benchmark 2-year note momentarily touched 5% in yield, while the 10-year yield increased by 3 basis points due to Powell’s comments. 
The S&amp;P 500 also faltered, briefly going negative the day before rising as traders considered the effects of the Fed’s shift to a more hawkish attitude. 
<h3 class="wp-block-heading" id="strong-a-pivotal-moment-for-the-us-economy-strong">A Pivotal Moment For The US Economy</h3> 
Powell’s assessment of a “lack of further progress” in inflation marks a turning point in the US economy. Central banks’ ability to balance the fine line between controlling inflation and leading economic growth will attract the attention of policymakers, businesses, and consumers. 
Even with the Fed firmly fixated on gaining its long-term inflation target of 2%, the task could be more cumbersome and complex than previously imagined. The result of this critical conflict with ongoing price pressures will undoubtedly influence the economy’s future course.

Fed Chair Powell Warns Of ‘Lack Of Further Progress’ On Inflation

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Thecoinrepublic.com

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