2024-05-01 22:19:34
Powell says there will be no interest rate hikes in the future.
“Lack of progress in inflation in the first quarter… “The cuts will take a long time.”
Guidance on timing of cuts: Damage “depends on indicators”
New York stock market mixed… Dow up 0.23%
U.S. Treasury yields fall due to rule out hike
At a press conference after the regular meeting of the Federal Open Market Committee (FOMC) on the 1st (local time), Jerome Powell, Chairman of the Federal Reserve System (Fed), expressed concerns about persistent US inflation, but said, “There is no possibility of an interest rate hike in the future.” “I don’t think there will be any,” he said. Although we do not know when the interest rate will be cut and there is a high possibility that high interest rates will continue for a long time, this suggests that at least an interest rate increase is not being considered yet.
However, he reaffirmed his policy of prolonging high interest rates by saying several times, “It will take more time until there is certainty (that interest rates will be lowered).” The New York Stock Exchange’s major indices immediately turned upward in response to Chairman Powell’s remarks, which were more ‘dove-like’ than concerns that he could declare a ‘hawkish pivot’ that would put an interest rate hike on the list, but an interest rate cut is still far away. Due to concerns that this could happen, the Standard & Poor’s (S&P) 500 Index and Nasdaq Index ended the day down 0.34% and 0.33%, respectively.
●Lower the possibility of an interest rate increase
At the FOMC regular meeting on this day, the Federal Reserve froze its benchmark interest rate in line with market expectations. Accordingly, the US base interest rate was maintained at 5.25-5.50%. “Inflation has eased over the past year but remains at high levels,” the Federal Reserve said in a statement. He also said, “It would not be appropriate to lower interest rates until we have confidence that inflation is moving sustainably toward 2%.”
The statement released by the Federal Reserve on this day included a phrase that was not in the previous statement: “There has been a lack of further progress toward the Committee’s 2% inflation target in recent months.” As the U.S. price index exceeded market expectations for the third consecutive time this year, the Federal Reserve expressed in new language in its statement that it is seriously monitoring the rise in prices. The ‘core’ personal consumption expenditures (PCE) price index that the Federal Reserve is watching rose 2.8% in March compared to the same period last year, exceeding market expectations (2.7%).
Accordingly, the financial market has been turbulent recently, with the value of the dollar soaring, U.S. Treasury yields rising, and stock markets falling due to concerns that Chairman Powell may mention an interest rate hike. Chairman Powell acknowledged that the current price slowdown trend is higher than expected, but said, “Currently, interest rates are sufficiently high and are suppressing demand. “It will be sufficiently restrictive over time.” This suggests the view that there is no need to make interest rates more restrictive, that is, to raise them. Chairman Powell also stated, “It is unlikely that our next move will be an interest rate hike.”
● In response to the question, ‘Is there time for a third cut?’ Powell said
On this day, Chairman Powell hinted at ruling out an interest rate hike, but skillfully avoided any hints about the timing of the rate cut. ‘Do you think there will be time to cut interest rates three times this year as shown in the Federal Reserve’s March Summary of Economic Outlook (SEP)?’, ‘Chairman Powell, has the probability of not lowering interest rates even once this year increased in your mind?’, ‘Presidential election Various questions were asked to read Chairman Powell’s mind, such as ‘Will the schedule not be affected?’, but his message was the same.
Chairman Powell said, “We did not see any progress in slowing inflation in the first quarter of this year (January to March). “I think it will take longer than expected to get the confidence needed to lower interest rates,” he said, but avoided providing guidance by saying, “There are no probabilities in my mind,” and “We have to look entirely at future economic indicators.”
However, there was no change in optimism about the U.S. economy. He emphasized that even if the inflation rate continued to be high this year, the overall pattern of slowdown will continue, saying, “There is no worry about stagflation. “Even if the U.S. economic growth rate has slowed, it is still solid,” he said.
New York = Correspondent Kim Hyun-soo [email protected]
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2024-05-01 22:19:34