Federal Reserve Board Chairman Jerome Powell, in a speech at Spelman College in Atlanta, dismissed market expectations for aggressive interest rate cuts as premature. Powell emphasized that the Federal Open Market Committee intends to keep policy restrictive until inflation is solidly back to 2%. He also stated that they are prepared to tighten policy further if necessary.
Powell’s remarks led to a rise in the markets and a decline in Treasury yields. These comments signaled a shift towards a dovish stance, which has supported a strong Wall Street rally.
The Fed has undergone 11 interest rate hikes, taking rates to the highest level in 22 years. Powell noted that current inflation levels are still above the central bank’s target and emphasized the need for careful consideration and continued progress.
Traders are pricing in the possibility of rate cuts starting as early as March 2024, but Powell and other officials have not indicated that this is being considered. Powell reaffirmed that decisions are made meeting by meeting based on incoming data and the implications for economic activity and inflation.
Overall, Powell’s speech reiterated the Fed’s cautious approach to policy, emphasizing the need for continued vigilance and data-driven decisions.
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