Loading...

Fed’s Powell says he’s not convinced enough to cut interest rates

In this post:

  • Jerome Powell said he is not ready to cut interest rates because he needs more data on inflation.
  • The Fed is concerned that high interest rates will eventually destroy America’s economic growth.
  • Powell has emphasized his political neutrality and operational independence as election approaches.

Federal Reserve Chair Jerome Powell has revealed that he’s not ready to pull the trigger on cutting interest rates just yet.

With inflation beginning to cool off and the labor market showing signs of easing, Powell and the Federal Reserve have been overwhelmed with closely watching all economic indicators. He said that:

“We’ve seen some modest progress. But we need more data to be confident that inflation is moving sustainably toward our 2% goal.” 

Rates can’t stay too high for too long

But Powell is also worried about keeping the rates high for too long. There’s a delicate balance here. He has no choice but to tread extra carefully.

“Elevated inflation isn’t our only risk,” he said. “Cutting rates too late could weaken economic activity and employment.”

Powell’s been preparing for the usual two day stint at the Capitol Hill, facing both the Senate Banking Committee and the House Financial Services Committee. 

Fed's Powell says he's not convinced enough to cut interest rates
Capitol Hill is the seat of the United States Congress. Credit: Alamy

Though it has been almost a year since the Federal Open Market Committee (FOMC) raised interest rates. The Fed’s overnight borrowing rate is currently between 5.25% and 5.50%, and this is the highest it’s been in 23 years.

America is dealing with its highest inflation levels since the 1980s.

Rate cuts expectations are still there

Market expectations are now leaning toward the Fed beginning to cut rates in September, possibly followed by another quarter percentage point reduction by the end of the year. 

However, the FOMC has said before that it is open to one rate cut. Now Powell and his colleagues have admitted that the latest data are a bit more optimistic after a surprising jump earlier in the year. 

The Fed’s preferred measure is the personal consumption expenditures price index. As of May, it was at 2.6%, down from like 7% in 2022.  Though Powell’s Capitol meeting is expected to get a little intense thanks to the heat of the presidential campaign.

The Dems have demanded that he cuts the rates sooner rather than later, because waiting too long could derail the progress that’s been made regarding job creations.

But Powell isn’t moved. He has made it a point to make sure everyone knows that his and the Federal Reserve’s political stance is neutral. As things stand, polling data shows chances of he Republicans taking over the White House to be quite high.


Reporting by Jai Hamid

Subjects tagged in this post: | |

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

Share link:

Most read

Loading Most Read articles...

Stay on top of crypto news, get daily updates in your inbox

Related News

Ethereum partners with Immunefi for an ‘Attackathon’ with a $2M bounty
Cryptopolitan
Subscribe to CryptoPolitan