(MENAFN) Federal Reserve Chairman Jerome Powell delivered a warning, indicating that persistent high inflation is likely to defer any rate cuts by the Fed until later this year. Speaking during a panel discussion at the Wilson Center, Powell expressed caution regarding recent inflation data, stating that it has not instilled greater confidence in the control of inflationary pressures. He emphasized that achieving confidence in managing inflation is expected to take longer than previously anticipated.
Powell underscored the importance of allowing current monetary policy measures to remain in place, citing the strength of the labor market and the progress made in addressing inflation thus far. He asserted that it is appropriate to afford restrictive policy measures additional time to take effect, with decisions guided by evolving data and expectations. Powell further stated that if high inflation persists, the Fed is prepared to maintain existing policy restrictions for as long as necessary.
The Fed chairman's remarks effectively dispelled any lingering expectations of imminent interest rate cuts by the central bank. Traders have revised their expectations accordingly, now anticipating rate cuts of 41 basis points in 2024, a significant reduction from the 160 basis points projected at the outset of the year. Powell's comments suggest that absent compelling evidence of a decline in inflation, the Fed is inclined to implement fewer rate cuts than initially anticipated, signaling a cautious approach to monetary policy adjustments in response to inflationary pressures.
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