US Fed's Powell Cautious on Rate Cuts... Bostic Predicts One in Q4

Jerome Powell, Chair of the U.S. Federal Reserve (Fed), and other senior Fed officials have been expressing cautious views on interest rate cuts day after day.

According to Bloomberg and CNBC on the 3rd (local time), Powell said at a forum held at Stanford University that "when it comes to inflation, it is still too early to determine whether recent indicators signify more than just a simple fluctuation."

Jerome Powell, Chair of the U.S. Federal Reserve

He added, "It is expected to be inappropriate to lower the benchmark interest rate until there is greater confidence that inflation will consistently decline toward 2%," and "Considering the economic situation and the progress of inflation, there is time to use incoming data as guidance for policy decisions."

Regarding the timing of the start of rate cuts, he said it would be "at some point this year."

Cash Bostianchik, Chief Economist at Nationwide Mutual Insurance, commented on Powell's remarks, saying, "It supports the prediction that rate cuts will begin in June. However, we need to see inflation figures ease starting from March."

Powell's remarks align with recent statements by senior Fed officials who have repeatedly emphasized that they will not rush rate cuts. The day before, Loretta Mester, President of the Cleveland Federal Reserve Bank, said, "I still think three rate cuts this year are reasonable," but added, "It is a close call." Mary Daly, President of the San Francisco Fed, stated, "Three rate cuts are the outlook," but "it is not a promise."

At the March FOMC, the Fed kept interest rates steady at 5.25?5.5% and maintained the year-end rate forecast at 4.6% on the dot plot. This implies that rates could be cut three times by the end of the year. However, 9 out of 19 members forecast two cuts, reducing the previous expectation of three cuts.

The remarks of 'hawkish' Rafael Bostic, President of the Atlanta Fed, were even more hawkish. In an interview with CNBC, Bostic said that rate cuts would be limited to one time in the second half of this year.

Bostic stated, "Strong productivity, a rebound in supply chains, and a resilient labor market suggest that inflation will decline much more slowly than many expect," and "If the economy develops as expected, with continued strength in Gross Domestic Product (GDP), unemployment, and a gradual decrease in inflation throughout the year, I think it would be appropriate to start rate cuts in the fourth quarter of this year."

Recent strong indicators have raised concerns that the Fed may delay the timing of rate cuts. Ahead of the U.S. Labor Department's employment report scheduled for the 5th, the Automatic Data Processing (ADP) report released on this day showed a private sector employment increase of 184,000 in March, the largest jump since July last year. The March Manufacturing Purchasing Managers' Index (PMI) was 50.3, surpassing both the previous month (47.8) and expert forecasts (48.5). A PMI above 50 indicates economic expansion, marking the first expansion phase in one and a half years since September 2022.

While the market largely expects rate cuts to begin in June, this expectation has fallen from the 70% range a week ago. According to the Chicago Mercantile Exchange (CME) FedWatch, market participants see a 62.3% chance that the Fed will initiate the first rate cut in June.

This content was produced with the assistance of AI translation services.