USD: Jerome Powell Speaks on Steady Interest Rates
The US FED Powell speech after the rates keep unchanged at 5.25%-5.50% is inflation is too higher from our target, Labour supply exceeded demand in the US economy. We see dual mandate on monetary policy changes. So when inflation come to our target 2% is hardly to forecast from our side. Rate cuts too little, too much, too soon, too late is harmful for US economy, So when inflation and unemployment rate come to our target 2% then only we do rate cuts in the monetary policy settings. Markets are dovish reacted to Powell speech last day. Already known expectations before the monetary policy settings, So Markets are moved higher before the speech and fallen after the speech.
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Federal Reserve Chairman Jerome Powell provided insights into the decision to maintain the policy rate, specifically the federal funds rate, within the unchanged range of 5.25%-5.5%. He elaborated on this stance and addressed inquiries during the post-meeting press conference.
Join us for live updates covering the Federal Reserve’s interest rate determination.
Here are key quotes from the Fed meeting press conference:
– Powell emphasized the progress towards the dual goals of the economy.
– He acknowledged the substantial easing of inflation over the past year but underscored its persistent elevation.
– The uncertainty surrounding the path to further inflation progress was highlighted.
– Powell discussed the impact of the current restrictive stance on inflation and the economy.
– The balance of risks in achieving dual goals was assessed, noting a lack of inflation progress.
– Attention to inflation risks and the strength of private domestic final purchases was reiterated.
– The tightness of the labor market was acknowledged, alongside observations on wage growth and labor demand.
– Powell emphasized the importance of incoming inflation data and the anchored nature of longer-term inflation expectations.
– The policy actions were reaffirmed to be guided by the dual mandate.
– Powell addressed the uncertainty of the economic outlook and the cautious approach towards rate cuts until greater confidence in inflation reaching 2% is attained.
– The potential risks associated with policy adjustments were discussed.
– The decision-making process was underscored to be data-dependent.
– Measures to slow the runoff of the balance sheet were explained to ensure market stability.
– The connection between policy restrictiveness, inflation, and the labor market was highlighted.
– Powell emphasized the importance of data in determining future policy actions, including potential rate cuts or hikes.
Additionally, the Fed’s decision to maintain the policy rate was confirmed in its statement following the April 30 – May 1 meeting. The statement addressed the lack of significant progress towards the 2% inflation target and outlined adjustments to the quantitative tightening strategy, including a reduction in the Treasury redemption cap.
Key points from the Fed’s policy statement include:
– Maintenance of the mortgage-backed securities redemption cap and reinvestment of excess MBS principal payments into Treasuries.
– Improved balance of risks to achieving employment and inflation goals.
– Continued elevation of inflation despite easing over the past year.
– Unanimous support for the policy decision among the Fed members.
USD: US Fed Holds Rates Steady, Cuts Treasury Cap to $25 Billion
In his post-decision speech following the Federal Reserve’s decision to maintain interest rates at 5.25%-5.50%, Chairman Jerome Powell addressed several key points. He highlighted the ongoing challenge of inflation persisting above the Fed’s target level and noted that labor supply in the US economy currently exceeds demand. Powell emphasized the Fed’s commitment to its dual mandate in monetary policy adjustments, particularly in the context of achieving the 2% inflation target.
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Regarding the timing of potential rate cuts, Powell underscored the risks associated with implementing them too little, too much, too soon, or too late, stating that such actions could be detrimental to the US economy. He reiterated that the Fed would consider reducing rates only when both inflation and the unemployment rate converge toward the 2% target.
The market reaction to Powell’s speech was characterized as dovish, with investors showing a cautious sentiment. Market movements reflected pre-existing expectations before the monetary policy decision, with prices rising prior to Powell’s speech and declining afterward.
Highlights from the US Federal Reserve Meeting Outcome:
The US Federal Reserve has announced its decision on interest rates following a two-day Federal Open Market Committee (FOMC) meeting. The benchmark interest rates remain unchanged at 5.25% to 5.50%, marking the sixth consecutive meeting where rates have been held steady. This decision aligns with expectations set by Wall Street analysts.
During the third policy-setting meeting of the year on May 1, the rate-setting panel unanimously voted to maintain the policy rate at its current 23-year high. The Fed noted a “lack of further progress toward the Committee’s two per cent inflation objective.” This statement suggests that the Fed is maintaining a cautious stance on rate reductions until there is more confidence in inflation moving sustainably toward the two per cent target.
Following a series of rate hikes totaling 5.25 percentage points since March 2022, aimed at addressing escalating price pressures, the central bank has opted to keep rates unchanged since July 2023. This decision reflects the Fed’s commitment to stabilizing inflation at elevated levels.
USD: Fed Maintains Steady Rates, No Indication of Imminent Cuts as Inflation Battle Stalls
Following the Federal Reserve’s decision to maintain interest rates between 5.25% to 5.50%, Chairman Jerome Powell addressed several crucial points in his post-decision speech. He highlighted the persistent challenge of inflation surpassing the Fed’s target level and acknowledged the current surplus of labor supply compared to demand in the US economy. Powell reiterated the Fed’s commitment to its dual mandate, especially in achieving the 2% inflation target.
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In terms of potential rate cuts, Powell emphasized the risks associated with implementing them inadequately or prematurely, cautioning against actions that could harm the US economy. He reaffirmed that the Fed would only consider rate reductions when both inflation and unemployment rates align with the 2% target.
Powell’s speech elicited a dovish market reaction, with investors displaying a cautious sentiment. Market movements mirrored pre-existing expectations before the monetary policy decision, as prices rose before Powell’s speech and declined afterward.
The Federal Reserve maintains its key interest rate unchanged once again on Wednesday and indicates no immediate plans to lower it, particularly in light of a recent resurgence of inflation earlier this year.
In a statement issued following a two-day meeting, the Fed specifically notes, “In recent months, there has been a lack of further progress toward the (Fed’s) 2 percent inflation objective.” Moreover, it reiterates its previous stance that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation (currently running between 3% to 4%) is moving sustainably toward” the Fed’s 2% goal.
Given the ongoing concerns regarding persistent inflation, it’s evident that the Fed is unlikely to consider rate cuts for at least a few months, if not longer. Fed Chair Jerome Powell emphasized this point during a news conference, stating, “It is likely to take longer for us to gain confidence that we are on a sustainable path down to 2% inflation. I don’t know how long it will take.”
While Powell anticipates a potential easing of inflationary pressures this year, he acknowledges a decrease in his confidence regarding this prediction. He adds, “My confidence in that is lower.” Powell also admits uncertainty regarding the timing and necessity of rate cuts, stating, “I don’t know that will be enough, sufficient for the Fed to lower rates in 2024. I don’t know that it won’t.”
The Fed’s statement also highlights the continued expansion of the economy, noting solid pace and strong job gains. Powell further indicates that even if inflation takes longer to subside, the Fed is unlikely to resume hiking rates unless there’s a notable acceleration in consumer prices.
Wednesday’s decision was widely anticipated following higher-than-expected inflation readings for the third consecutive month in March. The Fed’s key rate remains at a 23-year high, ranging between 5.25% to 5.50%, unchanged since July 2023.
Consequently, Americans can expect continued challenges with higher borrowing costs for mortgages, credit cards, and other loans, despite benefiting from higher savings account yields.
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