Search Mark
Home / Industry Dynamics

Fed Chair Powell Sticks To Rate Cut Plans Despite Strong Economy 


Today’s News 

Federal Reserve Chair Jerome Powell reaffirms the central bank's anticipation of interest-rate cuts this year despite stronger-than-expected economic activity, citing the expectation of declining inflation. 

Image Source: CNN
Federal Reserve Chair Jerome Powell reaffirms the central bank’s anticipation of interest-rate cuts this year despite stronger-than-expected economic activity, citing the expectation of declining inflation. 
Image Source: CNN 

Federal Reserve Chair Jerome Powell restated on Wednesday the central bank’s anticipation for interest rate cuts this year, despite the recent surge in economic activity. Powell highlighted that despite the stronger-than-expected economic performance, the Fed’s overarching expectation of diminishing inflation still allows room for interest rate reductions. 

Powell emphasized that indicators suggest the labor market is less constricted than in previous years, alleviating concerns of simultaneous increases in wages and prices. Moreover, while there were signs of inflation uptick in January and February, Powell asserted that the Fed remains steadfast in its belief that inflation will continue to decelerate despite occasional fluctuations. 

Video Source: Wall Street Journal

“The recent data do not… materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down to 2% on a sometimes bumpy path,” Powell stated during a conference in Stanford, Calif. 

The Federal Reserve had hiked rates rapidly over the past two years in response to escalating inflation, which reached a 40-year peak. However, with measures indicating a cooling in underlying inflation since mid-2023, the Fed’s focus has shifted from debating further rate hikes to contemplating when to implement cuts from the current levels aimed at curbing inflation. 

During their recent meeting last month, most Fed officials projected at least three rate cuts as appropriate for this year. However, they remain cautious about the risks associated with excessively easing policy, fearing it might undermine the progress made in controlling inflation or slow the economy excessively. 

“As progress on inflation continues and labor-market tightness eases, these risks continue to move into better balance,” Powell remarked. 

Investors in interest-rate futures markets are currently estimating a slightly higher than 50% likelihood of a rate cut at the Fed’s mid-June meeting. The Fed’s next meeting is scheduled for April 30-May 1. 

Some analysts argue that robust growth and substantial hiring over the past year indicate that monetary policy is not restrictive. However, Powell disagreed with such views, attributing the rapid economic expansion to factors like improved supply chains and increased workforce participation, including from higher immigration. 

“It’s not right—or maybe too soon—to conclude there is some significant disconnect there in terms of monetary-policy transmission,” Powell stated. 

Powell also downplayed the debate regarding whether there has been an increase in the neutral rate of interest, emphasizing that the current policy setting remains well above even the highest estimates of the neutral rate. 

“Where the neutral rate of interest settles out doesn’t really matter for policy today,” Powell concluded. 

Other News

ECB Urged To Halt Bank Subsidies 

Austrian central bank Governor Robert Holzmann calls for an end to European Central Bank subsidies to commercial banks, proposing a reduction in interest payments on excess liquidity to alleviate financial strain on central banks. 

Paramount Prefers Skydance, Rejects Apollo Bid 

Paramount Global enters exclusive merger discussions with Skydance, pausing other bids for 30 days, spurning a USD 26 billion offer from Apollo Global Management. The potential deal marks the possible end of Shari Redstone’s control over her family’s media empire. 

Austrian Central Bank Chief Warns On Strabag Deal 

Austria’s central bank chief voices concern over Raiffeisen Bank International’s plan to use funds tied up in Russia for a stake in Strabag, citing potential “tail risk,” while emphasizing that only Raiffeisen can assess whether such a risk is acceptable. 

Share to

Industry Dynamics

Dollar's Surge: Fed's Rate Divergence Sparks Accelerated Rally 

Today’s News  A surge in the value of the U.S. dollar has gained momentum, propelled by contrasting outlooks on interest rates in the United States. This rise comes amidst growing uncertainty regarding the Federal Reserve’s ability to aggressively cut rates this year in comparison to other global central banks. The U.S. dollar index, which gauges […]

2024-4-16 | Industry Dynamics

U.S. Economy Poised For Continued Growth 

Today’s News  The latest Wall Street Journal survey paints a notably optimistic picture of the U.S. economy, with economists revising their growth forecasts upward. The likelihood of a recession in the coming year has dwindled, now standing at 29%, a significant drop from 39% in January.   This marks the lowest probability since April 2022. […]

2024-4-15 | Industry Dynamics

Weekly Economic Calendar For April 15th, 2024 – April 19th, 2024

Weekly Economic Calendar For April 15th, 2024 – April 19th, 2024.

2024-4-12 | Industry Dynamics