Category: Forex News

Powell Says The Fed Is In No Hurry To Cut Rates During Congressional Testimony

His testimony provided no new insight saying, “We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.” He added caution to a statement saying, “But the economic outlook is uncertain, and ongoing progress towards her 2% inflation objective is not assured.”

Within that framework he acknowledged where the economy is with, “strong job creation”, and that “inflation has come down”, but there is “farther to go before they can consider the idea of rate cuts”. He also added that “cutting interest rates too soon risks inflation getting out of control”.

During the Q and A portion of his testimony, he was asked if he could explain what evidence he is looking for before inflation returned to 2% and interest rates can be cut? He responded by saying, “So we’re not looking for inflation to go all the way down to 2%, that’s not what we’re looking for. What we want is just more evidence that will give us more confidence that inflation is on a path down to 2%, sustainably. So that will come in the form of good inflation readings. We want to see just a bit more evidence so that we can be confident.”

His comments slightly changed the probability of interest rate cuts by June of this year. According to the CME’s FedWatch tool last week there was a 14.7% probability that rates would remain at current levels in June, today the probability has gone down to 12.1%.

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