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Market disillusionment soars: more and more voices against a rate cut in the US

Market disillusionment soars: more and more voices against a rate cut in the US

The president of the Federal Reserve Bank of Minneapolis, Neel Kashkarihe revealed that US monetary policymakers have time to evaluate the incoming data before reducing interest ratespointing to changes in the post-pandemic economy.

“It’s possible, at least during the post-pandemic recovery periodthat the policy stance representing a neutral position has increased,” Kashkari wrote in an essay posted on the bank’s website on Monday. “It gives the FOMC time to evaluate upcoming economic data before beginning to reduce the funds rate federal, with less risk that an overly restrictive policy will hinder economic recovery”.

Policymakers have kept rates unchanged since Julyor, since inflation has steadily decreased. Fed officials have indicated they are willing to lower interest rates this year, although they have indicated that they are in no rush to do so.

Interest rates: Powell’s words

The president of the Fed, Jerome Powellsaid policymakers are likely to expect beyond March to reduce interest rates in an interview with the program “60 Minutes”. He reiterated to a wide public audience that Fed officials want to see more economic data to make sure inflation is on a sustainable path toward its 2% target.

The “danger of acting too soon is that the job isn’t quite done, and that the really good readings we’ve had over the last six months somehow turn out not to be a true indicator of where inflation is headed,” he said. Powell in the interview.

We do not believe that is the case“, said. “But the prudent thing is to simply give it some time and see that the data continues to confirm that inflation is falling to 2% on a sustainable basis.”

Powell said it is not likely that the Federal Open Market Committee, the Fed panel that sets interest rates, “reach that level of trust” about the trajectory of inflation at his March 19-20 meeting, echoing remarks he made at a press conference on Wednesday.

Pelley said in a low voice that Powell suggested the first cut could come mid-yearalthough the transcript of the interview – which included comments that were not aired during the program – did not indicate this.

Although inflation has fallen substantially in recent months, Powell has repeatedly stressed the central bank’s need for more data before reducing borrowing costs. Last week he indicated that a rate cut in the first quarter is unlikely.

The Fed’s preferred inflation gauge slowed to a rate of 2.6% late last year, well below its peak of 7.1% reached in mid-2022. Although still above the Federal Reserve’s 2% target, the labor market remains strong. Data released Friday showed unemployment remained at a record low of 3.7% in January, as employers added another 353,000 jobs.

Source: Ambito

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