June 12, 2024
“That’s what we’ve been getting with good progress on inflation with growth at a good level with a strong labor market. Ultimately we think rates will have to come down to continue to support that but so far they haven’t had to. that’s why we’re watching so carefully for a sign of weakness we don’t really see that we really see what we wanted to see which is gradual cooling in demand gradual rebalancing of the labor market while we continue to make progress on inflation. We’re getting good results here.”
There it is – that’s why the federal reserve has decided now is not the time to cut interest rates. But at least one rate cut is expected still this year.
As I reported in this video earlier today – the Fed decided to keep interest rates steady at the highest level we’ve seen in more than 20 years. 5.25-5.5%. We’ve been sitting at that rate since July of last year. As I have reported for years the whole point of these high interest rates is to make the cost of borrowing money expensive so people and businesses decide not to spend pull their money out of circulation so inflation can come down. Which – as you heard the chairman say…it has.
But that doesn’t mean that Americans feel good about this economy.
“I don’t think anyone knows have definitive answer as to why people are not as happy about the economy we don’t tell people how to think or feel about the economy that’s not our job. people experience what they experience all I can tell you what the data show, we’ve got an economy that’s growing at a solid pace very strong labor market unemployment at 4percent we had a period of high inflation inflation has come down significantly and we’re doing everything we can do to fully restore price stability. In the meantime it’ll be painful.”
So when is the pain of these high rates going to be over? Are we ever going to see interest rate cuts? The short answer is yes. But the long answer is — originally the Fed penciled in three rate cuts for 2024 – but today – after stubbornly high inflation numbers this year – the fed decided cut that projection to one or maybe two rate cuts in 2024 with more cuts penciled in for next year and 2026.
“If you set policy at this restrictive level eventually you will see weakening in the economy. That’s always been the thought Since we raised rates this far we’ve always been pointing to cuts at a certain point.”
But when? When is it going to happen? Cutting too late could crash the economy…cutting too early go cause inflation to spike back up.
“We want to gain further confidence certainly more good inflation readings will help with that. But it’s not going to be just the inflation readings it’s going to be totality of data, what’s happening in the labor market, what’s happening with the balance of risks, what’s happening with the forecast what’s happening with growth you look at all that and you ask are we confident are we confident that inflation is moving down 2%.”
Watch Chairman Powell’s press conference here.
