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Fed Chair Throws Rate Cut Timing Into Doubt

Federal Reserve Chair Jerome Powell has thrown the timing of interest rate cuts into doubt, saying the U.S. central bank wants to see more progress made on lowering inflation.

Powell also stressed that he is in no rush to ease monetary policy and that interest rates will only be lowered once inflation moves back down to the Fed’s 2% annualized target.

Speaking at Stanford University, Powell said: “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward two per cent.”

The latest comments from the Fed chair come two weeks after America’s central bank voted to hold its benchmark short-term interest rate steady at 5.25% to 5.50%.

The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, was at 2.5% in February, with the core rate that excludes food and energy at 2.8%.

Other inflation measures for the U.S. show that consumer price increases remain above 3% on a year-over-year basis.

While inflation has come down from a peak of 9.1% in June 2022, it has proven to be stubborn and difficult to lower in recent months.

Powell said that inflation is on a “bumpy path” and acknowledged that: “Recent readings on both job gains and inflation have come in higher than expected.”

However, Powell reiterated that interest rate cuts are “likely to be appropriate at some point this year” though he would not say when.

Futures traders are now placing the odds of the first interest rate cut occurring in June of this year at 54%, down from 75% a few weeks ago.