Federal Reserve Chairman Jerome Powell speaks during a press conference following a two-day closed session of the Federal Open Market Committee on Interest Rate Policy at the Federal Reserve Board on December 13, 2023 in Washington, DC.
Kevin Lamarque | Reuters
Federal Reserve Chairman Jerome Powell said on Tuesday that while the U.S. economy is otherwise strong, inflation has not returned to the central bank’s target and there is no chance of a rate cut anytime soon. He pointed out that it was even lower.
Powell said at a policy forum focused on U.S.-Canada economic relations that inflation continues to trend downward, but not fast enough and the policy status quo should be maintained.
“While recent statistics show solid growth and continued strength in the labor market, there has been no further progress towards returning to the 2% inflation target so far this year,” he said in a panel talk. It shows,” he said.
Powell echoed recent comments from central bank officials in suggesting that current policy levels are likely to remain in place until inflation is close to target.
Since July 2023, the Federal Reserve has maintained its benchmark interest rate in a target range of 5.25% to 5.5%, the highest level in 23 years. This is the result of 11 consecutive interest rate hikes that began in March 2022.
“Recent data clearly does not give us much confidence and instead indicates that it will likely take longer than expected to achieve that confidence,” he said. “Having said that, we believe the policies are in place to address the risks we face.”
Powell added that “we can maintain the current level of restrictions for as long as necessary” until inflation picks up further.
The comments came after inflation data for the first three months of 2024 came in better than expected. According to the March consumer price index released last week, the inflation rate is trending at an annual rate of 3.5%, which is far from the peak of around 9% in mid-2022, but will rise from October 2023 onwards. There is a tendency.
Treasury yields rose during Powell’s remarks.benchmark 2 year memoInterest rates, which are particularly sensitive to Fed interest rate movements, briefly exceeded 5%, but the benchmark 10 year yield It rose by 3 basis points. The S&P 500 was shaken by Powell’s comments, briefly turning negative the day before, but has since recovered.
10 year and 2 year yields
Powell noted that the Fed’s preferred measure of inflation, the Consumer Expenditure Price Index, showed core inflation at 2.8% in February and has been little changed over the past few months.
“We said on the spot [Federal Open Market Committee] Before that happens, we will need to have greater confidence that inflation is on a sustained path towards 2%. [it will be] “Recent data clearly does not give us much confidence, and instead indicates that it is likely to take longer than expected to achieve that confidence,” he said.
Financial markets have been forced to reset expectations for interest rate cuts this year. As of early 2024, traders in the federal funds futures market were pricing in six or seven rate cuts this year, starting in March. As the data evolves, expectations shift to one or two cuts, assuming a quarterly percentage point change and not starting until September.
In their latest update in March, FOMC officials said they expected three rate cuts this year. However, in recent days, several policymakers have emphasized the data-dependent nature of the policy and have not committed to setting a level of reduction.
Correction: Chairman Powell’s comments come after higher-than-expected inflation data for the first three months of 2024. Previous versions listed the year incorrectly.
