Fed Chairman Powell says there is “lack of further progress” on inflation this year | Wilnesh News

Federal Reserve Chairman Jerome Powell said on Tuesday that although the U.S. economy is otherwise strong, inflation has not yet returned to the central bank’s target, indicating that the possibility of an interest rate cut in the short term is further reduced.

In a speech at a policy forum focusing on U.S.-Canada economic relations, Powell said that although inflation continues to fall, progress is not fast enough and the current policy status should remain unchanged.

“Recent data point to solid labor market growth and continued strength, but there is a lack of further progress so far this year toward returning to the 2% inflation goal,” the Fed chairman said during a panel discussion.

Echoing recent statements from central bankers, Powell said current policy levels are likely to remain unchanged until inflation approaches target.

Since July 2023, the Federal Reserve has maintained its benchmark interest rate at a target range of 5.25%-5.5%, the highest level in 23 years. This is the result of 11 consecutive interest rate hikes starting in March 2022.

“Recent data clearly do not give us greater confidence, but rather suggest that achieving that confidence may take longer than expected,” he said. “That said, we believe policy is adequate to address the risks we face.”

Powell added that until inflation shows more progress, “we can maintain current levels of restrictions as long as necessary.”

This follows higher-than-expected inflation data for the first three months of 2023. The March consumer price index released last week showed inflation at an annual rate of 3.5%, well below a peak of around 9% in mid-2022 but having been trending higher since October 2023.

U.S. Treasury yields rose during Powell’s speech.benchmark 2 year noteThe index, which is particularly sensitive to changes in Federal Reserve interest rates, once exceeded 5%, while the benchmark index 10-year return rate up 3 basis points. The S&P 500 fluctuated after Powell’s speech, briefly turning negative for the day before recovering.

Powell pointed out that the personal consumption expenditures price index, the Fed’s preferred inflation indicator in February, showed core inflation at 2.8% in February and had not changed much in the past few months.

“We said at the (Federal Open Market Committee) that we need to have greater confidence that inflation is sustainably moving towards the 2% target before we can ease policy appropriately,” he said. “Recent data certainly do not give us greater confidence. , suggesting instead that achieving such confidence may take longer than expected.”

Financial markets have had to recalibrate expectations for rate cuts this year. At the start of 2024, traders in the federal funds futures market were expecting six to seven rate cuts this year, starting in March. As the data has progressed, expectations have shifted to one or two rate cuts (assuming a quarter-percentage point cut), and that would not begin until September.

Federal Open Market Committee (FOMC) officials said in their latest update in March that they expected three rate cuts this year. In recent days, however, some policymakers have emphasized the data dependence of the policy and have stopped short of committing to setting a level for cuts.