The Fed Ready to Cut US Interest Rates? Powell: The time has come

Jakarta, CNBC Indonesia – The Chairman of the Federal Reserve Jerome Powell indicated that an interest rate cut could be coming soon, although he did not give a definite indication of the time or size of the cut.

“It’s time to change policy,” Powell said in his much-anticipated keynote address at the Fed’s annual meeting in Jackson Hole, Wyoming, on Friday (8/23/2024).

“The path of travel is clear, and the timing and pace of interest rate cuts will depend on incoming data, evolving expectations and the balance of risks,” he said, as reported by CNBC International.

Powell emphasized that while inflation has slowed significantly, the Fed can now focus more on its dual mandate of keeping the economy close to full employment.

“Inflation has come down significantly. The job market is not too hot now, and the conditions are not as tight as they were before the pandemic,” said Powell.

However, Powell did not provide clear guidance on when interest rate cuts would begin. Markets expect the Fed to begin cutting interest rates in September, but Powell did not say when he expects policy easing to begin.

Powell also noted that the recent rise in inflation is a “global phenomenon”, caused by “rapid increases in demand for goods, disrupted supply chains, tight labor markets, and sharp increases in the prices of goods.”

When inflation began to rise in early 2021, Powell and his colleagues and many Wall Street economists dismissed it as “transient.” However, when it became clear that inflation was spreading from goods to services, the Fed reversed course and began raising interest rates, adding 5.25 percentage points to a previously near-zero interest rate. this.

Powell said there are many lessons to be learned from this experience, and emphasized that “there is still a lot to learn” from the situation.

Financial markets responded well to Powell’s speech, with stock prices rising and Treasury bond yields falling sharply. Traders remain confident that a rate cut of at least a quarter of a percentage point will happen in September, with the odds of a fifty percent cut rising to around 1 in 3.

Although the task of controlling inflation is not yet completely complete, Powell emphasized that the Fed has made significant progress toward achieving that goal.

(luck/luck)

BlackRock’s CEO expects the Fed to cut interest rates twice in 2024