According to BlockBeats, on December 19, Federal Reserve Chairman Powell explained in a press conference why higher inflation than the Federal Reserve's target can be compatible with further interest rate cuts. He stated that even if next year's inflation rate drops to only 2.5%, the Federal Reserve may still cut rates next year as indicated by the dot plot, as inflation will be moving in the right direction.
Powell further explained that if next year's core PCE inflation rate drops to 2.5%, what we see is meaningful progress in reducing inflation.
According to the latest quarterly economic projections summary from the FOMC, the Federal Reserve expects the PCE and core PCE inflation to drop to only 2.5% by 2025, still above the Federal Reserve's target of 2%, while the Federal Reserve expects to cut interest rates twice in 2025. (Jin Shi)