Fed's Powell Highlights 'Uncertainty' That Makes it Difficult to Predict Rate Cuts
Federal Reserve Chair Jerome Powell highlighted the economic data uncertainty that makes it difficult for policy makers to predict exactly when they will start cutting interest rates.
"We're left with ambiguous results, and we have to deal with that uncertainty around data," Powell said Wednesday at a press conference shortly after the Federal Open Market Committee decided to leave the key interest rate unchanged at a range of 5.25% to 5.5%. "The overall picture is one of a strong and gradually cooling, gradually rebalancing labor market."
Still, he said inflation remains "too high," even after the latest data released Wednesday that showed the consumer price was flat in May, compared with a month earlier although it increased 3.3% from a year ago.
At the FOMC meeting, policymakers penciled in just one rate cut this year, less than the three seen in March. The change in outlook came after progress in inflation paused in the first quarter, he said.
"What we took away from that was that it's probably going to take longer to get confidence we need to begin to loosen policy," Powell told reporters. "The economy has repeatedly surprised forecasters in both directions, and today was certainly a better inflation report than almost anybody expected. And we'll just have to see what the incoming data flow brings and how that affects the outlook and the balance of risks."
The median projections see the fed funds rate at 5.1% by the end of this year, up from 4.6% expected in March when policy makers last released their so-called dot plot that illustrates the FOMC members' expectations. For next year, the rate is expected to be at 4.1% and for 2026, it's 3.1%. Longer run projections have the key borrowing cost at 2.8%.
"Inflation has eased substantially from a peak of 7% to 2.7% but is still too high," Powell said. "We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures."
The summary of economic projections of the Fed board members show they expect core personal consumption expenditure (PCE) inflation at 2.8% this year, before declining to 2.3% next year and 2% in 2026.
Last week, Department of Labor data showed jobless claims in the week ended June 1 remained well below last year's level, adding to evidence of continued resilience of the labor market.
Last week, Department of Labor data showed jobless claims in the week ended June 1 remained well below last year's level, adding to evidence of continued resilience of the labor market.
"We're watching so carefully for signs of weakness, we don't really see that," he said, referring to the labor market. "We kind of see what we wanted to see, which was gradual cooling in demand, gradual rebalancing in the labor market while we continue to make progress on inflation. We're getting good results here."
Disclaimer: This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Indexes are unmanaged and cannot be directly invested in. Past performance is no indication of future results. Investing involves risk and the potential to lose principal. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information regarding your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty regarding its adequacy, completeness, accuracy, or timeliness for any purpose of the above content. See this link for more information.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Moomoo Senior News and Community Manager
Former editor at Bloomberg, then Lazard Asset Management. Posts aren’t investment advice. Views are just mine.
3522Followers
14Following
8902Visitors
Follow
Keyon Pritchett : To me, they seem scared to cut rates too soon, afraid it will backfire on them. That is one of the reasons they keep pushing the hypothetical rate cut time back and back. Hoping they have a clear sign of what to do. In my humble opinion of course...![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
發103484366發 Keyon Pritchett : I'm kinda wonder why is it when they previously hiked the rates, they didn't seems too bother about getting everything and data in line before doing so, they just hike in a rush and when things were not improving to their expectation, they hiked it again, but now there's a lot hesitation, more like hoping to cut the rate only when there's a guarantee of result, cutting rate should be done gradually and fine tune it along the way.
Keyon Pritchett : That would be because raising rates at the time or any time is always in the best interest of the governing body but lowering them would be in the consumer's.
發103484366發 Keyon Pritchett : Short term yes, but in the long term it's not good for the economy when the government has overly manipulated the interest rate, even if they cut rate by 0.25 now, I don't think the impact would be devastating, t would again allow the economy some elasticity to adapt to changes, just like a rubber band, if you pull it overly tight for too long period, it will lose it's elasticity. Then when you suddenly listen the right tightness, it couldn't react.
DavidCCL : - YouTube US government wants the inflation rate to be high?
Keyon Pritchett 發103484366發 : That is also true!
Shootingstar : Could it be the longer they keep rates high the more unstable countries not named will be pressured to borrow or go to war causing chaos and the one that stands to gain is Usa who is The win win by creating bills to earn the money from arms sales they manufacture at highly marked up prices? Pocket bill money 25% sales of weapons locked 1000%?
Teddy Perkins : aslong as you're not walking around spreading the lie that Biden caused inflation you're good wit me. anything else is just ignorance or being disingenuous![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")