© Reuters
Investing.com – According to Federal Reserve Chairman Jerome Powell, monetary tightening in the US has reached its peak and, if all goes as it should, “it will probably be appropriate to begin reducing restrictive policy at some point this year ”. However, the work to be done is not finished and a change in rates as early as March is certainly unlikely, from what we saw in today’s meeting “it is not the base case”.
More evidence is needed
“The six months of declining inflation is a good story,” Powell stressed at the news conference, but the committee needs more evidence.
Indeed, “the economy has surprised in many ways since the pandemic, and continued progress toward our goal of 2% inflation is not assured,” Powell added. “The economic outlook is uncertain” and the Central Bank stands “prepared to maintain the current target range for the federal funds rate for a longer period, if appropriate.”
For this reason, no one on the board has actively considered lowering interest rates, the Fed “is not quite at that point”, explained the American banker.
In short, the cuts will come but a little patience is still needed for the Fed to have more evidence. For example, Powell pointed out, “in evaluating inflation data, most of it comes from commodity inflation; this means that the service sector should contribute more” to flattening the curve. “In other words – concluded Powell -, what interests us is the aggregate data, we need to see more. This is where we are.”
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