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Federal Reserve Chair Jerome Powell stated on Monday that while the recent half percentage point interest rate cut does not signal aggressive future moves, the next adjustments will be smaller in scale. Powell emphasized the importance of data in guiding future decisions, with a focus on balancing Inflation reduction and labor market support.
Powell suggested that if economic conditions remain consistent, there may be two more quarter percentage point rate cuts later this year. This stance diverges from market expectations for more forceful easing measures. The Federal Open Market Committee recently approved a half percentage point reduction, marking a departure from their usual incremental approach to policy adjustments.
Powell’s remarks come in light of the Committee’s belief that it was necessary to recalibrate policy to better align with current economic conditions. The focus has shifted from combating Inflation to sustaining a solid labor market amidst moderate economic growth. While Inflation remains close to the 2% target, core Inflation rates are slightly higher due to housing-related costs.
Overall, Powell expressed confidence in the economy’s strength and anticipated continued cooling of Inflation. The future moves of the Federal Reserve are expected to be more cautious, with potential quarter-point reductions in November and a half-point cut in December. Powell remains optimistic that economic conditions will support further disinflation in the near future.
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Lucas Bennett, completed his Finance degree at Bocconi University in Italy in 2018. He is highly skilled in corporate finance and risk management, beginning his career at a hedge fund in Milan. Lucas expertise extends to consulting for leading European firms, particularly within the energy markets sector. His analytical skills and strategic mindset have made him a sought-after consultant, and he continues to explore new opportunities within the financial services industry across Europe.
