Powell rules out cuts if inflation doesn't fall

Another cold shower for the markets that were anxiously awaiting a rate cut by the Federal Reserve, but apparently they will have to wait a little longer, because i times are not yet ripe according to the trend of inflation. The President of the Fed reiterated this yesterday, Jerome Powellspeaking at an economic forum in Washington.

What Powell said

The President and other Federal Reserve bankers yesterday reaffirmed the policy of “higher rates for longer”reiterating that there will be no cut if a return of theinflation within the 2% target. An eventuality that the data of the last few months has not confirmed, as too many pressures on prices still emerge.

“THE recent data clearly they didn't give us more confidence and instead indicate that it will probably take longer than expected to gain that trust”, declared Powell, clarifying “at this moment, given the strength of the labor market and the progress made so far on inflation, it is appropriate to give the restrictive policy more time to act and let the data and the evolution of perspectives guide us”.

“Self inflation were to persistwe could maintain the current level of restrictions for as long as necessary,” reiterated the Fed's number one, indicating “at the same time, we would have ample room for maneuver should the labor market weaken unexpectedly.”

Another “no” to an imminent cut

Not only Powell has the horizon receded of a rate cut in June. Even the vice president of the Fed, Philip Jefferson, said the U.S. central bank is prepared to keep its restrictive monetary policy in place “for longer” if inflation does not slow as expected.

“My baseline forecast continues to be that inflation will decline further,” Jefferson said, “with the official rate kept stable at current leveland that the job market will remain strong, with job supply and demand continuing to rebalance.”

How interest rate expectations change

US central bankers are expected to leave rates unchanged at their next meeting on April 30-May 1, but until recently it was thought that rate cuts would begin in June, with a quarter-point reduction, followed by two more cuts by the end of 2024.

Now, however, it is believed thatand there will be no adjustments to the June 11-12 meetingoe that the first cut is scheduled for September, while the chances of two more cuts within the year are decreasing.