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Hearing before the US Senate: Powell sees small progress in the fight against inflation

Hearing before the US Senate: Powell sees small progress in the fight against inflation
Hearing before the US Senate: Powell sees small progress in the fight against inflation

When will the first interest rate cut finally come in the USA? US Federal Reserve Chairman Jerome Powell commented on this during a questioning in parliament.

US Federal Reserve Chairman Jerome Powell has once again given no clear signal that the key interest rate will be cut soon. The latest inflation data indicate “modest further progress” in price developments, said Powell at a hearing before the US Senate. “More good data” would strengthen confidence that inflation is moving sustainably closer to the US Federal Reserve’s target. The Federal Reserve (Fed) is aiming for an inflation rate of two percent.

A rate cut that is too small or too late could endanger economic development and the labor market, said Powell. A rate cut that is too early or too large could, however, stall or reverse inflation progress. Most recently, the Fed left the key interest rate in the range of 5.25 to 5.5 percent for the seventh time in a row.

“The top US monetary authority is still not revealing exactly how long the Fed intends to stick to the current key interest rate level,” commented Elmar Völker, economist at Landesbank Baden-Württemberg, on Powell’s comments. The economic outlook has recently become cloudy. “Nevertheless, the next Fed interest rate decision on July 31st comes too early for an interest rate turnaround,” writes Völker. “If the indications of a noticeable economic slowdown in the coming weeks become more evident, the Fed meeting in September would, from today’s perspective, be the appropriate starting point for a phase of monetary easing.”

Source: Stern

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