17/4/24, 12:39 Powell Signals High Rates for Longer Due to Persistent Inflation - Bloomberg

Fed Meeting: Three Rate Cuts in 2024 Powell's Silence Frustrates Markets US Dollar Bets at Risk Key Dat

Economics | Central Banks

Powell Signals Rate-Cut Delay After Run of Inflation Surprises

Fed chair said appropriate to give policy further time to work
Central bank can keep rates steady for ‘as long as needed’

Powell Says Fed Policy Will Likely Need More Time to Work

Powell Says Fed Policy Will Likely Need More Time to Work

By Craig Torres
16 de abril de 2024 at 19:38 CEST
Updated on 16 de abril de 2024 at 20:58 CEST

Save 2:34

Federal Reserve Chair Jerome Powell signaled policymakers will wait longer than previously
anticipated to cut interest rates following a series of surprisingly high inflation readings.

Powell pointed to the lack of additional progress made on inflation after the rapid decline
seen at the end of last year, noting it will likely take more time for officials to gain the
necessary confidence that price growth is headed toward the Fed’s 2% goal before lower
borrowing costs.

If price pressures persist, he said, the Fed can keep rates steady for “as long as needed.”

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Bloomberg Daybreak: Fed Rate-Cut Delay (Podcast)

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“The recent data have clearly not given us greater confidence and instead indicate that is
likely to take longer than expected to achieve that confidence,” Powell said Tuesday in a
panel discussion alongside Bank of Canada Governor Tiff Macklem at the Wilson Center in
Washington.

“Given the strength of the labor market and progress on inflation so far, it is appropriate to
allow restrictive policy further time to work and let the data and the evolving outlook guide
us,” he said.

Powell’s remarks represent a shift in his message following a third straight month in which a
key measure of inflation exceeded analysts’ forecasts. It also shows officials see little urgency
to cut rates and suggests that any reductions in 2024 may come relatively late in the year, if
at all.

Policymakers narrowly penciled in three interest-rate cuts in forecasts published last month,
but investors are now betting on just one to two cuts this year, futures markets show. The
Federal Open Market Committee, the group of officials that sets interest rates, next meets
April 30-May 1.

“Their confidence has been shaken,” said Kathy Bostjancic, chief economist at Nationwide
Mutual Insurance Co. “He confirmed and emphasized what the markets were already pricing
in based on the economic data.”

Treasury yields reached fresh year-to-date highs — with the two-year note’s briefly
exceeding 5% and reaching the highest level since November — after Powell signaled the Fed
is in no hurry to cut rates.

The US economy continues to surprise Fed officials with its resilience. Employers added over
300,000 jobs in March — the most in nearly a year — and retail sales topped expectations.
That strength has coincided with a pickup in price pressures in 2024, raising concerns about
a stalling in progress toward the central bank’s inflation goal.

Read More: Fed Rate-Cut Path Thrown for a Loop as Inflation Progress Stalls

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17/4/24, 12:39 Powell Signals High Rates for Longer Due to Persistent Inflation - Bloomberg

Earlier Tuesday, Fed Vice Chair Philip Jefferson said he expects inflation will continue to
moderate with interest rates at their current level but persistent price pressures would
warrant holding borrowing costs high for longer. Richmond Fed President Thomas Barkin
said some recent data, including the consumer price index, has not “been supportive” of a
soft landing.

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— With assistance from Christine Dobby and Michael Sasso

(Adds economist reaction.)

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