Title: Fed Chair Powell Pushes Back Against Rate Cut Speculation
The Federal Reserve’s chair, Jay Powell, has sent a clear message to the markets, indicating that it is premature to speculate about interest rate cuts despite increasing bets from traders. In a speech on Friday, Powell emphasized that it was too soon to rule out further rate hikes or to start discussing cuts.
Following Powell’s remarks, yields on policy-sensitive two-year Treasury notes hit a five-month low, with traders increasing their bets on a potential rate cut as early as March 2024. This shift in market sentiment also led to a rally in stocks, with the S&P 500 reaching new highs.
Despite the Fed’s pause in its rate-raising campaign, Powell highlighted the uncertainties surrounding the US inflation outlook and concerns about easing financial market conditions. The central bank continues to closely monitor economic data and remains prepared to tighten policy further if necessary.
Austan Goolsbee, president of the Chicago Fed, echoed Powell’s sentiment, stating that there is “no evidence” that inflation will stall at 3 percent and forecasted a return to the Fed’s longstanding 2 percent target.
The Fed’s preferred inflation gauge, the core personal consumption expenditures price index, currently registers an annual pace of 3.5 percent as of October.
Overall, Powell’s remarks indicate that the Federal Reserve remains cautious about making any definitive decisions regarding interest rate cuts and will continue to rely on economic data to guide its policy decisions.