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  • Writer's pictureRealFacts Editorial Team

Speculation Mounts as Federal Reserve Signals Unlikelihood of Interest Rate Reductions


Jerome Powell, Federal Reserve Chair

Federal Reserve Chair Jerome Powell's recent remarks have thickened the expectation that interest rate cuts are unlikely in the near future, sparking speculation among Wall Street analysts about the possibility of any adjustments occurring this year. Powell emphasized the ongoing challenge of bringing inflation down to the Fed's 2% target, suggesting that it may take longer than anticipated to build sufficient confidence for policy changes. In CNBC’s article “Wall Street pushes out rate-cut expectations, sees risk they don’t start until March 2025,” Jeff Cox quotes Mark Zandi, Moody's Analytics chief economist, saying, “My sense is they need two, probably three consecutive months of inflation numbers that are consistent with that 2% target. If that’s the bar, the earliest they can get there is September. I just don’t see rate cuts before that.” Mark emphasizes the need for sustained alignment with the inflation target before rate cuts are considered, projecting that such cuts may not happen until at least September, given the current inflation rate of around 3%.


Market sentiment has become increasingly uncertain as traders navigate the fluctuating messages from the Fed. Despite earlier expectations for a rate cut in December, the idea of no cuts until 2025 is now a real possibility, according to economists at Bank of America. However, amid this uncertainty, Citigroup remains optimistic, predicting potential easing measures as soon as June or July, driven by anticipated inflation trends. Nonetheless, the Fed's delayed response raises concerns about potential policy missteps and their impact on economic stability, particularly in the labor market and financial sector. Zandi stresses the importance of proactive measures, warning against complacency in addressing inflationary pressures. Thus, the key question remains: will the Fed demonstrate flexibility in adapting to mitigate risks and guide the economy toward a sustainable path?


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