Will FED cut rates soon?
Federal Reserve Chair Jerome Powell said Monday that the central bank will not wait until inflation hits 2% to cut interest rates.
Speaking at the Economic Club of Washington D.C., Powell referenced the idea that central bank policy works with “long and variable lags” to explain why the Fed wouldn’t wait for its target to be hit.
“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said.
Instead, the Fed is looking for “greater confidence” that inflation will return to the 2% level, Powell said.
“What increases that confidence in that is more good inflation data, and lately here we have been getting some of that,” he said.
Powell also said he thinks a “hard landing” for the U.S. economy was not “a likely scenario.”
Speaking at the Economic Club of Washington D.C., Powell referenced the idea that central bank policy works with “long and variable lags” to explain why the Fed wouldn’t wait for its target to be hit.
“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said.
Instead, the Fed is looking for “greater confidence” that inflation will return to the 2% level, Powell said.
“What increases that confidence in that is more good inflation data, and lately here we have been getting some of that,” he said.
Powell also said he thinks a “hard landing” for the U.S. economy was not “a likely scenario.”
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ZnWC : If Fed cuts interest rate, it will like be September. But there are many uncertainties that can disrupt the plan like geopolitical tension (Ukraine-Russia conflict), oil price (OPEC+), trade war (China-US), disease outbreak (bird flu), extreme weather etc.
Brianjh OP ZnWC : yes, I agree. they also have the tendency to cut rates later than necessary / holding high IR than necessary
EJAY28 ZnWC : Whats with September ? sorry for asking.
ZnWC EJAY28 : Fed is likely to cut rate in September.
EJAY28 ZnWC : Ouh I see, so will the price of stocks goes up or down when the Fed lower the interest rate ?
Brianjh OP EJAY28 : up. cutting rates is meant for stimulating economic growth, but it after the rate cut, it will take some time for the effect