Powell Proposes 50 Basis Points More Cuts for 2024, According to Reuters

The U.S. economy appears to be on track for a gradual decline in inflation, which could enable the Federal Reserve to reduce its benchmark interest rate. Fed Chair Jerome Powell shared these insights during a speech prepared for the National Association for Business Economics conference in Nashville, Tennessee. He indicated that the Federal Reserve is not committed to a predetermined course of action, stating, "The risks are two-sided, and we will continue to make our decisions meeting by meeting."

Powell suggested that if the economy performs as anticipated, two more interest rate cuts totaling 50 basis points could occur within the year. However, he also noted that the Fed is flexible regarding the pace of any cuts, implying that adjustments could be made more quickly or more slowly according to economic conditions.

At its September 17-18 meeting, the Fed lowered its policy rate range by half a percentage point, reducing it from a 20-year high of 5.25%-5.50% to a current range of 4.75%-5.00%.

Market Reactions:

• Stocks: Experienced a slight decline, registering a loss of 0.23%.
• Bonds: The yield on benchmark U.S. 10-year notes rose to 3.80%.
• Forex: The currency market saw a gain of 0.39%.

Comments from Experts:

Greg Faranello, Head of U.S. Rates Strategy at Amerivet Securities, remarked on Powell’s tone, suggesting that he is attempting to manage market expectations. He noted a slight economy weakening but also pointed out the resilient sectors.

Wasif Latif, President and Chief Investment Officer at Sarmaya Partners, expressed that Powell’s comments dampened market enthusiasm for rapid rate cuts, highlighting a phenomenon of re-pricing based on those statements.

Robert Phipps, Director at Per Stirling Capital Management, observed that Powell’s remarks indicated a deliberate approach to rate cuts, contrasting with market forecasts for immediate reductions.

Steve Englander, Head of Global G10 FX Research at Standard Chartered Bank, highlighted Powell’s reaffirmation of potential rate cuts and discussed the optimistic outlook regarding consumer spending due to revised savings rates.

Quincy Crosby, Chief Global Strategist at LPL Financial, interpreted Powell’s statements as indicative of a stable economy and labor market, suggesting that the Fed may proceed with another rate cut in November, pending further economic data.

In summary, Powell’s speech reflects a cautious but proactive approach to monetary policy, emphasizing the Fed’s reliance on incoming economic data to guide its decisions.