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Powell's Grim Inflation Reality Check Rattles Wall Street

Powell's Grim Inflation Reality Check Rattles Wall Street

Apr 16, 2024

Powell's Grim Inflation Reality Check Rattles Wall Street

In his latest remarks, Federal Reserve Chair Jerome Powell has indicated that the central bank may need to maintain its current policy stance for a longer period due to ongoing inflation concerns. Despite anticipation for future rate cuts, Powell's comments have suggested a less immediate path to easing.

During a closely watched speech, Powell noted that "recent data show lack of further progress on inflation," a development that has not been well received by the markets. The yield on the 2-year Treasury note, often a barometer for rate expectations, climbed above 5% for the first time since November, reflecting investor uncertainty.


"It will likely take longer for confidence on inflation," Powell added, implying that the Federal Reserve is opting for a cautious approach. He emphasized the appropriateness of allowing policy "to take further time to work," hinting at a more prolonged period of restrictive monetary policy.

These sentiments echo similar cautionary tones from Fed Vice Chair Philip Jefferson, who earlier suggested that the central bank's key rate might need to stay at its peak to combat persistently high inflation. Jefferson pointed out the lack of recent progress in slowing the rate of price increases.

Reuters reported that the market has been adjusting its expectations for rate cuts in 2024, with forecasts now indicating only 1.5 cuts, which is less than half of what the Federal Reserve's own projections suggest.

Meanwhile, President Joe Biden has expressed his own views on the likelihood of rate cuts. He predicted a rate cut by the end of the year, though he acknowledged that recent inflation reports could push such a move back by at least a month.

As the Federal Reserve grapples with an increasingly unpredictable economy, the timing and extent of any future rate adjustments remain uncertain.

ZeroHedge Article

Reuters Article


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