Link: https://www.cnbc.com/2024/04/03/feds-powell-emphasizes-need-for-more-evidence-that-inflation-is-easing-before-cutting-rates.html
The CNBC article above details the comments of FED Chairman Jerome Powell, and his current, and the FED's current view on the high interest rates. It seems like for the last couple of months investors, consumers, and businesses have been praying for cuts to the interest rate every time the monthly inflation numbers come out. And more so, it seems like every time these figures come out, the FED says "we need to see more progress" every time they speak about cutting interest rates. On April 3rd, coming off a bright report on inflation the FED's Chairman Jerome Powell once again addressed speculation on interest rates, and surprise surprise, Powell, once again told the markets that they needed more sustained progress before cutting rates. His direct quote is provided below.
“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent” - Jerome Powell
Of course most likely markets will respond accordingly, dropping a little before continuing its climb up on the backs of AI and other tech sectors, and market columnists will keep claiming cuts will happen this year, as they push their previously disclosed timetable back yet another month. The markets seem to forget the big picture, and a couple months of cooling inflation does not mean the overall level of inflation is back to normal, but that won't stop wishful thinking and daydreams of cheap loans from banks.
I think the most interesting development this year was highlighted in the article. Powell got a lot of questions from reporters pertaining to his stance on the FED staying independent. As this year is an election year, the FED is already seeing pressure from both sides of the isle on cutting rates. Powell addressed concerns of political meddling in the FEDs decision-making by standing firm on the longstanding separation between the FED and the government, saying the FED won't allow the government to push them toward any rash decisions. I expect these talks and worries of political intervention to continue and heat up as the election draws closer and I even expect to see publicized pressure from members of the government on the FED to cut rates in the name of "helping the little guys".
4 comments:
What potential risks do you think could come about from political intervention in the Federal Reserve's decision-making process, particularly in an election year?
Do you think Chairman Powell's reaffirmation of the Federal Reserve's independence in the face of political pressure, especially during an election year, is crucial for preserving the institution's integrity and effectiveness in conducting monetary policy?
It is very interesting to remember that the Fed operates as an independent component when bringing politics into question. However, with the importance of government cooperation to maintain a healthy economy, I wonder if the Fed will start to crack as political pressure increases
The Fed is independent of all the political things going on. I still think the Fed's decisions have an impact on elections though.
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