Jerome Powell Speech Hints Uncertainty In Future Rate Cuts

After the United States Federal Reserve cut interest rates by 50 basis points, the first of its kind in 4 years, all eyes are now fixed on Jerome Powell for his speech. Typically, this speech offers insights into what to expect from the Federal Open Market Committee (FOMC) moving forward. With a cool-down in monetary policy, the market optimism appears inflamed.

Jerome Powell Hints More Rate Cuts Ahead

The US Federal Reserve is a very cautious financial regulator. While many anticipated the implementation of the 0.5% interest rate cut, people have yet to learn what the Fed Chairman will announce today. However, considering the rate of improvement in the US economy, marked by better than expected US CPI Inflation data, many anticipated more pivots ahead.

Jerome Powell neither confirmed nor denied this projections as he placed conditions on further rate cuts ahead. In the run-up to the latest interest rate cut, Fed officials have hinted at constant watch of key economic indices. In the Fed Chair’s speech, he highlighted how much crucial inflation data have cooled over the past year.

He recalled the slowdown in inflation data as measured by PCE, CPI and other indices. He said while the current figures rose 2.5% in the past year in August, these are closer to the target of 2%. According to him, these slowdown in inflation have continued to strengthen the economy overall.

He said the Federal Reserve will continue to make its decision meeting by meeting. This aligns with earlier stance from Fed officials who noted that economic data will determine how the Feds will approach interest rate cuts.

Following its Peers

Jerome Powell said the Fed is well positioned to address any form of risk that might arise in the market and economy. Should the inflation data grow back, Powell said the Fed might dial back its policies overall.

In line with this rate cuts, the Federal Reserve’s dovish stance is in line with related move from the Bank of England (BoE). The BoE implemented a 25 basis point cut in August in response to slowing inflation. Overall, Powell implied that the Fed will only make more cuts depending on what the economy showcased.