Federal Reserve Chairman Jerome Powell recently stated in a television interview that the Federal Reserve may wait until after March to cut interest rates again, with an expected three rate cuts this year.
In the evening of February 4th, CBS aired "60 Minutes" program, Powell hinted that interest rate cuts were unlikely to occur in March, and the pace of rate cuts may be much slower than market expectations. He revealed that interest rate makers expect to cut rates by 75 basis points by December this year, each time by 25 basis points.
The market has been betting that the Federal Reserve will start cutting interest rates from March, with a maximum of six rate cuts this year. But last week, Powell stated after the Federal Reserve's interest rate meeting that the timing of the rate cut may be delayed, coupled with strong employment data in January, which basically shattered hopes of a rate cut in March.
On January 31st, the Federal Open Market Committee (FOMC) of the Federal Reserve issued an interest rate resolution statement after its first monetary policy meeting this year, announcing that the federal funds rate would remain unchanged. Market concerns about interest rate cuts or temporary balance sheet reductions did not appear in the resolution. Powell stated at the press conference that it is unlikely that the FOMC will reach the confidence level to adopt a rate cut at the March meeting. This statement undoubtedly poured cold water on the optimistic expectations of the market for interest rate cuts. In the interest rate chart released in December last year, Federal Reserve officials expected a 75 basis point rate cut this year.
On February 2nd, data from the US Department of Labor showed that 353000 new non-farm jobs were added in January, almost twice the expected value of economists. The average hourly salary of employees continued to rise, reaching a new high since March 2022. Earlier, the US Department of Commerce announced an annual GDP growth rate of 3.3% for the fourth quarter of 2023, with a full year growth rate of 2.5%, which also exceeded expectations.
Powell reiterated in an interview with CBS that Federal Reserve officials hope to see more indicators to ensure that inflation can sustainably achieve the 2% target, and taking action too quickly will once again stimulate inflation. "The US economy is strong, with stable growth and a strong labor market: the unemployment rate is only 3.7%. But before we start cutting interest rates, we still hope to gain more confidence," he said.
The inflation rate in the United States has dropped from a slightly above 9% high in 2022 to the latest 3.4%, but there is still some distance from the Federal Reserve's ultimate goal of 2%. Powell said that the importance of restoring price stability cannot be overemphasized. "What I mean is that inflation is low enough and predictable, so people don't have to think too much about prices in their daily lives."
In addition, Powell emphasized in the latest interview that he and his colleagues will not be disturbed by political pressure. Republican Donald Trump, who is running for president, said in an interview with Fox Business last Friday that if he is re elected as President of the United States, he will not appoint Powell as Chairman of the Federal Reserve, as the latter's interest rate cut is to help incumbent President Joseph Biden win re-election.
In November 2017, then President Trump nominated Powell as the new chairman of the Federal Reserve. The Biden government recognized Powell's performance during the COVID-19 and the behavior of the Federal Reserve to increase interest rates in response to inflation, so it nominated him for re-election.