On Wednesday, March 20, the US Federal Reserve made the expected announcement that it will maintain interest rates at their current levels following its two-day policy meeting. But before the year is over, the central bank made a few indication about perhaps cutting rates more than once.
The Fed Chair is seeking verification of the low inflation figures from the previous year.
Federal Reserve Chair Jerome Powell will continue to seek confirmation inflation is moving closer to the central bank’s 2% target, even after a recent spate of hotter inflation readings, reported CNBC.
Powell added, “The other thing is that you had some pretty low readings in the second half of the year, so it might be harder to make that 12-month window forward.”
Powell went on, “But we are searching for information that validates the low readings that we had last year.” “And give us more assurance that the inflation we observed was actually declining sustainably to 2%.”
Powell thinks that robust hiring would not force the Fed to postpone rate decreases.
According to Federal Reserve Chair Jerome Powell, there would be no justification for delaying interest rate reductions if the labor market continued to strengthen, as CNBC reported.
He stated that “strong hiring in and of itself would not be a reason to hold off on rate cuts,” stressing that there is no need to be concerned about inflation in light of the employment situation alone. Powell has already stated that a sudden deterioration in the labor market “may also call for a policy response.”
Powell notes that the overall downward trend has not changed despite higher inflationary statistics.
The consumer price index and personal consumption expenditure, two important indicators of inflation, increased in January and February. According to CNBC, Fed Chair Jerome Powell believes that this data is only more evidence of the nonlinear downward trajectory of inflation.
During a press conference on Wednesday afternoon, he stated, “I think they haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2%.” “These two months’ worth of data won’t cause us to overreact or ignore them.”
S&P 500 breaks above 5,200 for the first time
Following the Federal Reserve’s decision to hold rates at a 23-year high and to retain forecasts for three rate decreases before the end of 2024, stocks increased on Wednesday, with the S&P 500 surpassing the 5,200 level for the first time ever, according to CNBC.
The Nasdaq Composite and S&P 500 both saw increases of 0.9% and 0.7%, respectively. The 0.7% increase in the Dow Jones Industrial Average was 280 points.
Following the Fed’s announcement, stocks slightly climb.
The major averages ticked higher Wednesday afternoon after the Federal Reserve issued its policy decision and rate forecast, reported CNBC.
The S&P 500 gained 0.3%, and the Nasdaq Composite jumped 0.5%. The Dow Jones Industrial Average advanced more than 140 points, or nearly 0.4%.
Powell said there has been no decision regarding the decrease of the balance sheet.
According to CNBC, Fed Chair Jerome Powell stated that although the central bank hasn’t decided how to alter the rate of its balance sheet reduction, a change is about to come.
Powell stated, “The committee’s overall opinion is that, in keeping with the plans we’ve previously released, it will be appropriate to slow the pace of run-off fairly soon.”
Powell says, “Our policy rate is probably at its peak.”
According to CNBC, Federal Reserve Board Chairman Jerome Powell reaffirmed on Wednesday that rate cuts are still planned by policymakers before the year ends, given that economic growth continues.
Powell stated, “We believe that our policy rate is probably at its peak for this type of cycle and that it will likely be appropriate to begin dialing back policy restraint at some point this year if the economy evolves broadly as expected.”
Additionally, he reaffirmed his support for the Fed’s 2% inflation target.
