On Wednesday, Fed Chairman Jerome Powell made comments concerning the possibility of a rate cut. He declared talk of a rate cut was premature, suggesting instead that more rate hikes could happen in the future. His comments come after a recent decline in the 10-year Treasury yield, which now stands at 2.537%.
Last December, the Federal Reserve raised the benchmark federal funds rate to a range of 2.25% to 2.5%. At the time, there was an expectation that the Fed could raise the rate again sometime in 2019. But with a recent slowdown in the economy and increasing pressure from the Trump administration for a rate cut, questions have arisen whether the Fed may have to revise its outlook.
Mr. Powell made it clear that he did not see any reason to alter the Fed’s plans. He stated that the current Fed stance is appropriate, and that he did not see any need to change the current outlook. The Fed chair added that the path forward will depend on economic data and changes in financial market conditions.
The Fed chairman also warned that premature talk of a rate cut could come with unintended consequences, such as driving up inflation or creating financial instability. His comments suggest that at least in the near term, the Fed will stay the course on rates.
Despite Mr. Powell’s comments, there has been increasing pressure from some observers for the Fed to cut rates. With the current economic situation, many believe that the Fed must take action in order to support the economy. But Mr. Powell is standing firm and is not willing to budge on the current stance.
At the least, Mr. Powell has made it clear that the Fed’s plan is still a flexible one. The Fed is not bound to any particular course and will adjust as necessary. This means that there is still potential for a rate cut if the economic data warrants it. But for the time being, Mr. Powell and the Fed are content with the current outlook.
Fed Chair Powell: Increasing Rates Still an Option – No Need to Cut Prematurely!
