News

Powell Says Rates to Stay Higher for Longer
Recent inflation data indicate the central bank may need more time to feel comfortable lowering interest rates, Fed Chair Powell said during a panel discussion at the Wilson Center in Washington alongside Bank of Canada Governor Macklem. “The recent data have clearly not given us greater confidence and instead indicate that is likely to take longer than expected to achieve that confidence,” Powell said. “Given the strength of the labor market and progress on inflation so far, it is appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us,” he added. This indicates that Fed officials don't feel a pressing need to lower rates and implies that any rate cuts in 2024 may occur toward the end of the year, if they happen at all.
Published on 2024-04-16

Fed Reinforces Caution on Cutting Interest Rates
The Federal Reserve does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%, minutes from the FOMC meeting in March showed. Policymakers generally noted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation was moving sustainably down to 2%. At the same time, the central bank remains highly attentive to inflation risks but it had also anticipated that there would be some unevenness in monthly inflation readings as inflation returned to target. The Federal Reserve left the fed funds rate steady at a 23-year high of 5.25%-5.5% for a fifth consecutive meeting in March 2024, in line with market expectations. The so-called dot plot showed policymakers were still planning to cut interest rates three times this year, similar to the quarterly forecasts in December.
Published on 2024-04-10

Powell Reiterates Fed In No Hurry to Cut Rates
Fed Chair Powell said at the San Francisco Fed that PCE inflation data for February was more along the lines of what the Fed wants to see and that it is good to see something coming in line with expectations. However, the latest readings aren’t as good as what policymakers saw last year and the Fed can wait and become more confident before cutting interest rates. In fact, policymakers don't need to be in a hurry to reduce borrowing costs. The Fed's base case is for inflation to come down but if the base case doesn't happen the Fed would hold rates where they are for longer, Chair Powell added.
Published on 2024-03-29

Fed Leaves Rates on Hold, Indicates Three Rate Cuts in 2024
The Federal Reserve left the fed funds rate steady at a 23-year high of 5.25%-5.5% for a fifth consecutive meeting in March 2024, in line with market expectations, but signaled that it still plans three rate cuts before the end of the year. Policymakers added that they do not expect it will be appropriate to reduce the target range until they have gained greater confidence that inflation is moving sustainably toward 2%. Meanwhile, US GDP growth is seen higher in 2024 (2.1% vs 1.4% in the December projection), 2025 (2% vs 1.8%) and 2026 (2% vs 1.9%). PCE inflation forecasts were kept unchanged for 2024 (2.4% vs 2.4%) but were raised for 2025 (2.2% vs 2.1%) while the core rate is seen higher this year (2.6% vs 2.4%) while forecasts were left unchanged for 2025 at 2.2%. The unemployment rate is seen lower at 4% in 2024 (vs 4.1%) but projections were kept at 4.1% for next year.
Published on 2024-03-20

Fed to Keep Rates Steady, Give Signals on Rate Cuts
The Federal Reserve is expected to keep the fed funds rate steady at a 23-year high of 5.25%-5.5% for a fifth consecutive meeting in March 2024, as policymakers emphasize the importance of being confident that inflation is on a sustainable path towards 2% before considering any rate adjustments. Policymakers are also set to publish fresh quarterly economic projections, with all eyes on the so-called dot plot for insights into potential interest rate cuts and the timing of such moves. The latest projections in December indicated three quarter-point rate cuts by the end of 2024. Meanwhile, annual inflation in the US unexpectedly edged up to 3.2% in February from 3.1% and the core rate fell less than anticipated to 3.8%, suggesting it is now getting more difficult to push inflation back to the target, with services inflation proved stubborn.
Published on 2024-03-20

Fed Is In No Rush to Cut Rates
The fed funds rate is likely at its peak for this tightening cycle and it will likely be appropriate to begin dialing back policy restraint at some point this year, although only when there is greater confidence that inflation is moving sustainably toward 2%, prepared remarks from Fed Chair Powell for his semiannual Monetary Policy Report to the Congress showed. Powell reinforced that the economic outlook is uncertain, and ongoing progress toward the 2% inflation objective is not assured and there are risks of reducing policy restraint either too soon or too late. As a result, the Fed will continue to assess the incoming data, the evolving outlook, and the balance of risks to make any adjustments to the fed funds rate. On the economic front, Powell noted that labor market tightness has eased and inflation has diminished substantially, although it remains above the target.
Published on 2024-03-06

Fed Cautious on Cutting Interest Rates
Fed policymakers judged that the policy rate was likely at its peak for this tightening cycle, but generally noted that they did not expect it would be appropriate to reduce it until they had gained greater confidence that inflation was moving sustainably toward 2%, minutes from the January FOMC meeting showed. Also, participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained. Only two policymakers highlighted the potential drawbacks of maintaining a restrictive stance for an extended period, while others noted the risks of moving too quickly. Meanwhile, the Fed reinforced the future path of the policy rate would depend on incoming data, the evolving outlook, and the balance of risks. The Federal Reserve kept the fed funds rate unchanged at a 23-year high of 5.25%-5.5% for a fourth consecutive meeting in January 2024, in line with expectations.
Published on 2024-02-21

Week Ahead - Feb 19th
Next week, investors' attention will turn to the FOMC minutes release, with traders scrutinizing any insights on when the Federal Reserve will start cutting interest rates. Simultaneously, the flash S&P Global US PMIs will offer an assessment of this month's economic performance. Beyond the US, attention will extend to flash PMIs for the Eurozone, Germany, France, UK, Japan and India. The Ifo Business Climate indicator in Germany, Turkey's interest rate decision, and Canada's inflation rate will also be in the spotlight.
Published on 2024-02-16

Fed Not Ready for March Cut
The Federal Reserve kept the Fed funds rate unchanged at a 23-year high of 5.25%-5.5% for a fourth consecutive meeting in January 2024, in line with expectations. Policymakers added that they do not expect it will be appropriate to reduce the rates until they have gained greater confidence that inflation is moving sustainably toward 2%. During the press conference, Chair Powell said it will be appropriate to begin reducing rates sometime this year but the central bank will continue to make decisions on a meeting by meeting basis and he doesn't think a March cut is likely. Meanwhile, the Fed removed reference to further rate hikes from the statement, saying that the risks to achieve its employment and inflation goals are moving into better balance, but noting it would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of such goals. The central bank noted that inflation has eased over the past year but remains elevated.
Published on 2024-01-31

Fed to Keep Rates Steady, Hints on Rate Cuts Eyed
The Federal Reserve is expected to keep the Fed funds rate unchanged at a 23-year high of 5.25%-5.5% for a fourth consecutive meeting today, but the focus will be on any indications regarding the timing and pace of interest rate reductions in 2024. At the very least, it is anticipated that the central bank's policy statement will no longer retain its "tightening bias," which previously indicated a higher likelihood of an increase rather than a cut. This shift is largely attributed to the consensus among almost all Federal Reserve officials, who have expressed the belief that there is no necessity for further rate hikes. Meanwhile, the CME Fed watch tool points to a 44.7% chance of a 0.25 bps rate cut in March compared to 73% a month ago as recent data showed inflationary pressures are under control but the US economy and job market remain strong.
Published on 2024-01-31

Waller Says Fed Could Cut Rates this Year but Not Rapidly
With economic activity and labor markets in good shape and inflation coming down gradually to 2 percent, there is no reason for the Fed to move as quickly or cut as rapidly as in the past, Governor Christopher J. Waller said in prepared remarks for his appearance at The Brookings Institution. The Governor added that the healthy state of the economy provides the flexibility to lower the (nominal) policy rate to keep the real policy rate at an appropriate level of tightness. The data received in the last few months is allowing the Fed to consider cutting the policy rate in 2024 but concerns about the sustainability of such data trends require changes in the path of policy to be carefully calibrated and not rushed.
Published on 2024-01-16

Fed Officials See Rates Cuts in 2024
Fed policymakers viewed the policy rate as near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves, minutes from the last FOMC meeting in December 2023 showed. Almost all participants indicated that reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024. The Federal Reserve kept the fed funds rate steady at 5.25%-5.5% for a third consecutive meeting in December 2023, in line with expectations but indicated 75bps cuts in 2024.
Published on 2024-01-03

Fed Indicates Three Rate Cuts in 2024
The Federal Reserve kept the fed funds rate steady at 5.25%-5.5% for a third consecutive meeting in December 2023, in line with expectations but indicated 75bps cuts in 2024. Policymakers said that recent indicators suggest that economic growth has slowed and job gains have moderated but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The central bank also published new projections. GDP growth is expected higher this year (2.6% vs 2.1% in the September projection), but slightly lower in 2024 (1.4% vs 1.5%). Also, PCE inflation was revised lower for both 2023 (2.8% vs 3.3%) and 2024 (2.4% vs 2.5%) as well as core PCE inflation which is seen at 3.2% in 2023 (vs 3.7%) and 2.4% (vs 2.6%) next year. Unemployment projections remained steady at 3.8% for 2023 and 4.1% for next year. The so-called dot plot showed the median year-end 2024 projection for the federal funds rate fell to 4.6% from 5.1% seen in September.
Published on 2023-12-13

Fed to Temper Expectations of Earlier Rate Cuts
The Federal Reserve is widely expected to keep the fed funds rate steady at 5.25%-5.5% for a third consecutive meeting in December 2023, and push back against expectations of rate cuts early next year. Back in September, the Fed's dot plot indicated two cuts in 2024, but Chair Powell recently deemed it premature to discuss rate decreases. Moreover, the central bank will release new economic and rate forecasts. As expected, headline inflation has been decelerating, reaching 3.1% in November. However, the core rate remains stubbornly high at 4%, double the Fed's 2% target. Also, the labor market remains robust, despite subtle indications of a slowdown.
Published on 2023-12-13

Fed to Move Carefully on Interest Rates
The risk of the Federal Reserve excessively raising interest rates, which could over-restrain the economy, has now reached a more balanced state with the risk of not increasing rates enough to rein in inflation, Fed Powell implied in remarks at Spelman College in Atlanta. "The full effects of our tightening have likely not yet been felt. The forcefulness of our response to inflation also helped maintain the Fed's hard-won credibility, ensuring that the public's expectations of future inflation remain well-anchored,". Powell, aligning with recent colleagues' remarks, emphasized it was too early to declare the Fed's inflation fight over, noting a 3.0% annual price increase based on the central bank's target metric, while October saw a 3.5% rise when excluding food and energy costs—a gauge the Fed deems a more accurate reflection of inflation trends. "We are prepared to tighten policy further if it becomes appropriate to do so," he said.
Published on 2023-12-01

Fed Reiterates Cautious Policy Approach
All FOMC participants agreed that the Fed was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information and its implications for the economic outlook as well as the balance of risks, minutes from the last FOMC meeting on October 31-November 1, 2023 showed. Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the inflation objective was insufficient. The minutes also showed that despite the moderation, inflation remained well above the 2% longer-run objective, and that the Fed would need to see more data indicating that inflation pressures were abating to be more confident that inflation was on course to return to the target. The Fed kept the target range for the federal funds rate at its 22-year high of 5.25%-5.5% for a second consecutive time in November.
Published on 2023-11-21

Fed Not Fully Convinced Rates Are Sufficiently High
During a speech in Washington, Fed Chair Jerome Powell stated that it is too early for the central bank to definitively announce the conclusion of its significant interest-rate hikes over the last two years, despite not presenting a case for further rate increases. “The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance”. Powell mentioned that officials would carefully observe economic conditions to mitigate the risk of raising rates excessively and the danger of being “misled by a few good months of data.”
Published on 2023-11-09

Fed Maintains Rates at 22-Year High for the 2nd Time
The Federal Reserve kept the target range for the federal funds rate at its 22-year high of 5.25%-5.5% for a second consecutive time in November, reflecting policymakers' dual focus on returning inflation to the 2% target while avoiding excessive monetary tightening. Policymakers emphasized that the extent of any additional policy tightening would consider the cumulative impact of previous interest rate hikes, the time lags associated with how monetary policy influences economic activity and inflation, and developments in both the economy and financial markets. During the press conference, Powell signaled that the September dot-plot showing the majority of participants forecasting one more rate hike this year may not be accurate anymore. He also stated the FOMC had not discussed any rate cuts yet, while the primary focus remains on whether the central bank will need to implement additional rate hikes.
Published on 2023-11-01

Fed Set to Deliver Another Hawkish Hold
The Federal Reserve is expected to keep the target range for the federal funds rate at a 22-year high of 5.25-5.5% for the second consecutive time on Wednesday, as policymakers aim at simultaneously addressing the goal of returning inflation to the 2% target while preventing an overshoot in monetary tightening. On one hand, surging Treasury yields have pushed longer-term interest rates sharply higher, making it less necessary for the Fed to raise rates today. On the other hand, robust data points that further interest rate hikes may be needed. Inflation, although displaying signs of slowing down, remains elevated. Additionally, the economy is sustaining a strong growth trajectory, with GDP, retail sales, nonfarm payrolls, and housing activity surpassing expectations. Consequently, investors are eagerly anticipating Chair Powell's press conference, hoping to gain insights into the central bank's assessment of inflation, the state of the US economy, and its projected interest rate path.
Published on 2023-11-01

Fed to Proceed Carefully
The Fed kept the target range for the federal funds rate at a 22-year high of 5.25%-5.5% in its September 2023 meeting. The Fed is proceeding carefully and policymakers will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks, Fed Chair Powell said at the Economic Club of New York. Fed Chair added that tight policy is putting downward pressure on economic activity and inflation. However, additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy. Powell also noted that inflation is still too high and that a sustainable return to the 2% inflation goal is likely to require a period of below-trend growth and some further softening in labor market conditions.
Published on 2023-10-19