Federal Reserve Chair Jerome Powell had a clear message on Wednesday, February 1: as “gratifying” as it is that inflation has begun to slow, the central bank is nowhere near to reversing course or declaring victory.
Markets have repeatedly had to scrap bets for a quick pivot, pushing those expectations out farther as the central bank charged ahead with the most aggressive policy tightening in 40 years. Even simply acknowledging the possibility of a rate cut later in the year could undo some of the Fed’s work, forcing more Fed tightening and making it even harder to avoid a recession. Thus Powell’s repeated assertions about not cutting rates, and indeed needing to take them at least above 5% as policymakers forecast in December.
Rate cuts, they expect, will start in September – a view Powell said Wednesday is driven by the expectation of fast-receding inflation.
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