Federal Reserve Chair Powell keeps the door open for a rate cut in July:
Powell outlined three possible paths for monetary policy

Content

Press Conference Details

Monetary Policy

Possibility of raising interest rates

Press Conference Details

Here are more details on the four main points made at Powell’s press conference:

forecasts are likely to show that the majority of Federal Reserve officials favor two or fewer rate cuts this year.
In March, the Federal Reserve’s “dot plot” suggested that most officials believe three rate cuts would be appropriate this year.
However, with the hot inflation readings since that meeting,
economists have recognized the need to recalibrate the economy.
Although the Federal Reserve did not release a dot plot on Wednesday,
it will do so at the next meeting in mid-June.

Monetary Policy

In response to journalists’ questions, Powell outlined three possible paths for monetary policy.
Two paths could lead to rate cuts this year – one where inflation moves toward a decrease towards 2%,
and another where the labor market begins to weaken.

The other path is no cuts this year, with inflation moving sideways.
This leads to a dot plot in which the majority
of Federal Reserve officials lean towards two or fewer rate cuts this year.

The next Federal Open Market Committee meeting is scheduled for June 11-12.

Federal Reserve officials will have three more monthly readings
of the Personal Consumption Expenditures Index before the meeting.

Possibility of raising interest rates

The chances of the Federal Reserve raising interest rates are very slim.

At the beginning of his press conference,
Powell said he believes it is “unlikely” that the next move in interest rates will be a rate hike.

After being pressed by journalists about whether there was any
discussion of a potential rate hike at this Federal Reserve meeting,
Powell stumbled a bit before saying, “The policy focus was really
on what to do about maintaining the current level of restrictions.”

Powell says he expects inflation to recede this year and,
stepping somewhat away from his previous practices, offered his personal inflation forecasts for the coming months.

Powell said: “My personal expectation is that we will start to see more declines in inflation rates this year.”

He stated that he is unsure if that will be sufficient progress to stimulate a rate cut.

Powell added that he expects lower market rents to eventually reduce the
housing costs that have led to rising consumer price inflation.
Powell said: “I am confident that it will come, but I am not very confident about the timing.”

Federal Reserve Chair Powell keeps the door open for a rate cut in July

Federal Reserve Chair Powell keeps the door open for a rate cut in July

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