It seems investors will have to wait longer as the Fed is not confident about cutting interest rates, even though inflation is cooling off.
Federal Reserve Chair Jerome Powell stated on Tuesday that the central bank needs more data before cutting interest rates to make sure recent weak inflation readings accurately reflect underlying price pressures.
At a monetary policy conference in Portugal sponsored by the European Central Bank, Powell stated, “We’ve made quite a bit of progress and in bringing inflation back down to our target,” as reported by CNBC.
The Federal Reserve has maintained its benchmark policy interest rate within the range of 5.25% to 5.5% since July 2023, and it has increased the interest rate 11 times since March 2022. Although the Fed promised three interest rate cuts in 2024, stubborn inflation prevented this, leading investors to hope for just one rate cut.
It’s not all bad as there has been some modest progress, and the inflation rate has been decreasing over the past few months. According to the latest Consumer Price Index data, inflation rose 3.3% in May, lower than the 3.4% expected. Moreover, the Consumer Price Index for All Urban Consumers (CPI-U) remained unchanged in May after increasing by 0.3% in April. And the so-called core CPI, which excludes more volatile energy and food prices, rose 3.4% last month, compared to an expected increase of 3.5% in May.
But maybe this isn’t enough for the Fed to decide on rate cuts, as the data is still well below its 2% inflation target. That’s why the Fed also indicated that there may only be one interest rate cut this year instead of the three cuts projected in December 2023.
“I’m not going to be landing on any specific dates here today,” CNBC reported Powell saying at Tuesday’s conference, after being asked about interest rate cuts in September.