The Federal Reserve is facing a tough choice this week: maintaining economic confidence and policy flexibility, while the market expects three rate cuts.
The message that Federal Reserve Chairman Powell needs to convey this week must be strong enough to reassure anxious investors due to market fluctuations, while also avoiding over-interpretation of the policy stance by the market. He needs to indicate that the economy remains robust, but the Federal Reserve is willing to adjust interest rates if necessary. The labor market remains strong, but if there is a deterioration, the Federal Reserve will not stand by idly; inflation shows signs of slowing down, but has not fully reached the target, so a commitment to a rate cut path cannot be easily made. 'Powell needs to imply that the Federal Reserve is closely monitoring market volatility but will not change its policy direction solely because of stock market adjustments.' —Mizuho
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Risks Tilted Toward Delayed Fed Rate Cuts This Year, Barclays Says -- Market Talk
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