April 22, 2024 — Powell Says Firm Inflation May Derail 2024 Cuts
APRIL 22, 2024 – POWELL SAYS FIRM INFLATION MAY DERAIL RATE 2024 CUTS
As inflation did not ease during the first quarter, the Federal Reserve is now unsure they can deliver the anticipated interest rate cuts this year, unless an economic slowdown occurs.
Fed Chair Jerome Powell’s comments last week signal a change in the Fed’s outlook, effectively closing the door to a summer rate cut. Powell said, “recent data have clearly not given us greater confidence and instead indicate it is likely to take longer than expected to achieve that confidence.” The good news was Powell did not indicate rates would have to go up, instead rates would remain at current levels as long as needed if inflation remains stubborn. But the Fed would be ready to cut rates quickly if the economy slows sharply. Powell pointed out wage pressures are moderating “albeit gradually”, implying a noticeable slowdown in wage growth will have to be evident for policymakers to expect inflation to improve.
Since the labor market remains strong and inflation is not abating, the Fed feels “it’s appropriate to allow restrictive policy further time to work.”