The Fed insists it will cut rates this year

US Federal Reserve Board Chairman Jerome Powell.

Jerome Powell reiterated on Wednesday that the Federal Reserve will cut interest rates this year.
While the Fed says it wants inflation to cool further, it doesn’t need for the measure to hit its 2% target in order to cut rates.
These latest comments stand in contrast to hawkish commentary that’s cropped up, with some forecasters predicting no cuts at all in 2024.

Fed Chair Jerome Powell on Wednesday silenced the growing chorus of forecasters questioning the prospect of rate cuts this year.

He said the central bank is still on pace to lower interest rates in 2024, but is waiting for to see more data and a continued cooling of inflation before doing so.

“We will carefully assess the incoming data, the evolving outlook, and the balance of risks,” Powell said during a Q&A session with the House Financial Services Committee. “The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.”

The S&P 500 reached intraday highs on Powell’s remarks, and closed up roughly 0.5% on the day.

Powell did clarify that inflation doesn’t have to fall all the way to 2% before the central bank decides to cut rates.

“That’s not what we’re looking for,” he said. “What we want is more evidence that will give us more confidence that inflation is on the path down to 2%, sustainably.”

Powell highlighted that the “good” inflation readings the Fed expects don’t have to be better than previous data, but that there just needs to be more of them. Which means all eyes are on the next CPI print slated for March 12.

“We don’t want a situation where the six months of good inflation data we had last year, that that didn’t turn out to be an accurate signal of where underlying inflation is,” he said.

Powell’s remarks contrast with some of the more bearish takes that have recently seeped into Wall Street chatter. Experts like Torsten Slok have forecasted no rate cuts may arrive at all in 2024. Some have even floated the possibility of a rate hike.

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