Daily Management Review

US Fed's Powell Claims A Rate Reduction By The Fed Is "Not Far" Off.


US Fed's Powell Claims A Rate Reduction By The Fed Is "Not Far" Off.
Jerome Powell, the chair of the US Federal Reserve, hinted on Thursday that if inflation indicators cooperate, interest rate reductions might not be far off.
The head of the central bank hinted that the day may not be far off in comments to the Senate Banking Committee, but he did not give a specific timeline for when he sees easing occurring.
“We’re waiting to become more confident that inflation is moving sustainably at 2%. When we do get that confidence, and we’re not far from it, it’ll be appropriate to begin to dial back the level of restriction,” Powell said in response to a question about rates and inflation.
In order to prevent the Fed from "driving the economy into recession rather than normalising policy as the economy gets back to normal," he stated that the cuts are necessary.
Powell delivered his speech at a moment when expectations for Fed policy had drastically changed in the financial markets.
Futures traders had wagered at the beginning of the year that the Fed would begin cutting in March and continue until it had done so six or seven times. According to current projections, the first cut will occur in June, and by the end of 2024, there will be four reductions totaling a full percentage point.
Although recent inflation data shows that price rises are still happening slowly, the unexpectedly high consumer price index surprised markets when the data was revealed for January were found to be more than expected. 
Powell did acknowledge, however, in this week's congressional testimony that inflation is declining, albeit not to the extent that the Fed is prepared to slash.
“I think we’re in the right place,” Powell said of the current policy stance.