Fed is not ready to start cutting interest rates
Jerome Powell recently told Congress that the Fed is planning to lower interest rates at some point this year, but they're not rushing to do it. They want to assure that inflation is under control and moving towards their goal of 2% before they make any changes. Even though there are signs the economy is doing well, the Fed is being cautious to not mess up the progress they've made in keeping prices stable.
Powell mentioned that the interest rate, which is now between 5.25% and 5.5%, might start to go down later this year. That being said, any decision to cut rates will be made with careful consideration of incoming economic indicators.
He said that the decision to cut rates will focus on the long-term objective of stable prices and full employment, rather than responding to short-term market expectations. Markets have expected the Fed would start to lower interest rates aggressively after they had raised them 11 times, adding up a total of 5.25%, from March 2022 to July 2023.
He also talked about his concerns in the banking sector and the impact of interest rates on housing affordability. As the Fed navigates through an uncertain economic outlook and political pressures in an election year, its cautious approach on interest rate cuts seek to find balance to support the economy while fighting against inflation.
The Fed is navigating between the risks of delaying interest rate cuts, which could harm the economy, and easing credit conditions too early, which might fuel inflation. This balance is crucial not only for the economy but also for Biden in the coming election. The Fed's decisions could impact his approval ratings and the public's perception of his economic management as a whole.
But…we all know rate cuts are inevitable…counting down 8 months from now (US General Election)![]()
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