2023-05-03 20:08:20
© Archyde.com Fed Chair Powell: Inflation still too high, short-term interest rate cut inappropriate
Financial Associated Press, May 4th (Editor Niu Zhanlin)On Wednesday Eastern Time, Federal Reserve Chairman Jerome Powell held a press conference. “We are strongly committed to bringing inflation back to 2% and we are prepared to do more if needed,” he said.
Powell’s speech was relatively hawkish, which also led to an increase in market expectations for the Fed to raise interest rates in June. After his speech, US stocks were on a roller coaster ride. All three major indexes turned lower following he finished speaking.
He said inflation remained well above target and the full impact of monetary tightening would take time to be felt. And given our view that inflation will take some time to come down, a rate cut is not yet appropriate.
Powell pointed out that at today’s meeting, some policymakers talked regarding pausing rate hikes, but it was not implemented at this meeting; it feels like we are getting closer to the end, maybe we can pause rate hikes.
The earlier FOMC statement wrote that the Committee will closely monitor the latest information and assess the impact on monetary policy. It is worth noting that this policy statement deleted the wording that had previously suggested that interest rate hikes would definitely continue.
Powell said that next, in the face of risks such as bank failures, excessive inflation and debt ceiling deadlock, the Fed will determine the outcome of interest rates meeting by meeting.
Regarding the banking crisis that the market is highly concerned regarding, Powell said that the banking situation has generally improved, but the extent of the impact is still uncertain. The U.S. banking system is healthy and resilient, and JPMorgan Chase’s acquisition of First Republic Bank is a “good result.” But I don’t want large banks to do large-scale acquisitions, and there is obviously a need for increased regulation and supervision of large banks.
Regarding the debt ceiling risk, Powell pointed out that if no debt ceiling agreement is reached, the economic consequences will be “highly uncertain”, and this interest rate decision did not take into account the debt ceiling impasse.
Powell believes that a mild recession in the U.S. is relatively unlikely, and if there is one, he hopes it will be mild.
Regarding the labor market, Powell said that the current US labor market is still “very tight”, however, there are some signs that the supply and demand in the labor market are returning to a better balance. He stressed that wage growth had shown some signs of moderation.
The “new debt king” Gundlach commented that the Fed’s decision did not make a commitment to suspend interest rate hikes, and it is likely to keep interest rates near this level. The probability of a recession is quite high right now, so the Fed is not expected to raise rates once more.
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