“Cut rates? We need more confidence in the fall in inflation”

Inflation And taxi applied by banks, two concepts that, never more than in recent years, are part of everyday conversation. In fact, the growth in inflation was followed by a rate increase applied by credit institutions, with consequent difficulties for consumers. The decline in the cost of living recorded over the last few months, however, had given rise to hopes for a reversal of direction by the central banks, but this enthusiasm was dampened Jerome Powellpresident of Federal Reservewho announced his institute's intention not to take immediate action lower interest rates.

Powell: “More is needed to lower rates”

During his long-awaited speech at Stanford University, which according to many could have opened the doors to a decline in rates, Jerome Powell he underlined that at the moment there are not optimal conditions for the United States Central Bank to go in the desired direction. “We do not expect it to be appropriate to lower rates until we have greater confidence that inflation is holding up moving sustainably downward towards 2%,” Powell said, adding that “given the strength of the economy and the progress made so far on inflation, we have time to evaluate the data that will arrive for our policy decisions”.

Rate cut postponed

The rate cut it seems to be so postponed to a date to be determined, with the decision taken in the United States which will inevitably also affect the operations of all the other central banks, including the European Central Bank. Powell has effectively put the brakes on the possibility of a reversal of course by claiming that “reduce rates too early or excessively could cause a reversal of the progress we have seen on inflation and, ultimately, also require greater monetary tightening to bring inflation back to 2%”. The cut, therefore, cannot happen yet for the president of the American Central Bank, but it is also necessary to avoid moving too late. In the latter case, in fact, an indecisive intervention could “cause weakenings not due to economic activity and inflation”.

Only one rate cut is expected in 2024

The words of Jerome Powell echo those already pronounced by the president of the Atlanta Fed, Raphael Bosticwho underlined that in 2024 there could be at most just one rate cut, instead of the expected three. In Europehowever, a first lowering is expected in June 2024, with the ECB which lends weight to Eurostat's flash estimate of inflation, which went from 2.6 percent in February 2024 to 2.4 percent in March.

The stock markets awaited Powell's words

As we said, there was great anticipation for Jerome Powell's words, so much so that in Bag there had been great caution. TO New York the pause was around parity, with investors awaiting greater indications from the Fed on the trend of theUS inflation and on the possible rate cut. Similar situation also in Europe where investor prudence once again prevails. Business Square, despite an improvement at the end, closed with an increase of 0.45 percent supported mainly by the banks. The Ftse Mib is at 34,480 points, recovering compared to the previous session, but still very far from the highs recorded during the first half of the year.