Federal Reserve Chairman Jerome Powell speaks before the Senate Committee on Banking, Housing and Urban Affairs in Washington, DC, the United States, on Tuesday, July 9, 2024.
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Economist Carl Weinberg said that the market currently firmly expects the U.S. to cut interest rates in September, but the Federal Reserve has good reasons to delay the rate cut.
London Stock Exchange data showed that on Thursday, money market pricing for an interest rate cut at the Federal Reserve’s autumn meeting rose from around 70% to over 90%. Consumer price index weaker than expected print.
Fed Chairman Powell has ramped up expectations for the move when he said Earlier this week, there were risks of keeping interest rates too high for too long – comments interpreted as “Moderately dovish” analysts think.
However, Weinberg, chief economist at High Frequency Economics, told CNBC that there are also risks in loose monetary policy, which clouds the prospect of interest rate cuts.european scream box” on Friday.
“The Fed chairman made it very clear in his testimony this week that…inflation indicators and the overall economy are moving in a way that we like,” Weinberg said.
He said this includes an unemployment rate of around 4%, an inflation rate close to 2% and an economy growing “roughly” at potential.
“But (Powell) also suggested that if the economy is at full employment, inflation is where we want it and growth is good, why would we change anything? Why would we modify what we have the authority to do? Why would we want to do this now? Case for a rate cut? Weinberg continued.
“Certainly there is noise, rumor and data supporting a rate cut at the (September) meeting. But there is also a dark cloud hanging over the decision.”
Weinberg added that while a rate cut now looks likely in the fall, a lot could change between now and the Fed’s Sept. 18 meeting.
Two more Consumer Price Index (CPI) printouts are due before this date. The next meeting of the Federal Reserve will be held at the end of July, when the market expects the possibility of a rate cut to be only 5%.
Although the peak of U.S. inflation over the past three years has been lower than that of many other major economies, the rate of decline has also been slower, causing the Federal Reserve to lag behind on the path to monetary easing.
central banks Eurozone, Switzerland, Sweden and Canada All countries have cut interest rates this year, and the Bank of England’s decision in August appears to be in jeopardy.
