On December 19, Financial Associated Press reported (Editor: Xia Junxiong) that on Wednesday, December 18, Eastern Time, Federal Reserve Chairman Powell stated at a press conference following the interest rate meeting that the Fed is at or near the moment to slow down rate cuts, and decisions on rate cuts next year will be based on data, with rate hikes seeming unlikely.
The Fed announced a 25 basis point rate cut on Wednesday, in line with market expectations, reducing the target range for the federal funds rate to 4.25%-4.5%. This is the Fed's third consecutive rate cut, having previously cut rates by 50 basis points and 25 basis points in September and November, respectively.
The latest interest rate dot plot shows that policymakers expect to cut rates twice in 2025, while in September, the forecast for the number of rate cuts next year reached four at one point.
Although a rate cut was ultimately made in December, Powell claimed it was a difficult but correct decision.
He pointed out that acting too slowly could unnecessarily weaken economic activity in the labor market, while acting too quickly could undermine the Fed's progress in controlling inflation. Therefore, the Fed is trying to find a balance between these two risks.
Discussing future monetary policy actions
Powell said that after this rate cut action, the Fed has lowered the policy rate by a full 100 basis points from its peak, and the restrictive stance of monetary policy is now clearly not as strict as before, allowing policymakers to be more cautious when considering further rate adjustments.
Regarding future monetary policy actions, Powell said that any rate cut decisions by the Fed in 2025 will be based on upcoming data rather than the current economic situation.
He said that since the Fed is working to maintain a strong labor market while bringing the inflation rate down to 2%, the possibility of rate hikes next year seems unlikely.
Affirming U.S. economic performance
Powell affirmed the performance of the U.S. economy, repeatedly using terms like stable, strong, and resilient.
He stated that the overall economic performance is strong; economic growth in the second half of 2024 is expected to exceed expectations; there is no reason to believe that the likelihood of an economic downturn is higher than usual; it is clear that the U.S. has avoided a recession; and he is very optimistic about the economy.
Powell stated that policymakers generally expect GDP growth to remain strong.
Discussing inflation and the job market
The Fed stated that given the persistent year-on-year inflation data, it will continue to monitor the progress of inflation improvement in 2025.
"When considering further rate cuts, we will pay attention to improvements in inflation," Powell said. "We have seen almost no significant progress on the 12-month inflation data."
Powell believes that consumers are feeling the effects of high prices more than the direct impact of high inflation.
"We are very aware that prices have risen significantly, and people are indeed feeling this, including for food, transportation, and heating costs. This global inflation outbreak has caused great suffering," he said. "Although the current inflation level has decreased significantly, people still feel the pressure of high prices, and this is the most intuitive feeling for consumers."
He added that the best solution to this is for the Fed to continue to work towards bringing the inflation rate down to the target level so that wages can keep up with inflation, ultimately restoring consumers' positive feelings about the economy.
Powell stated that policymakers are closely monitoring the dynamics of the labor market.
"From multiple indicators, we do believe that the labor market is cooling, but the cooling pace is not fast and does not raise real concerns," he said.
Some officials have begun to assess the potential impact of Trump's policies
U.S. President-elect Trump has threatened to implement a radical tariff plan after taking office, which economists generally believe could lead to a resurgence of inflation in the U.S.
Powell revealed that some members of the Federal Open Market Committee (FOMC) have begun to conduct preliminary assessments of the potential impacts of Trump's policies.
He also specifically mentioned Trump's tariff plan, stating that it is still too early to conclude how it will affect inflation.
Powell stated that the Fed has no intention of holding Bitcoin.
Trump previously promised to implement policies favorable to the cryptocurrency industry after taking office and is considering establishing a Bitcoin strategic reserve.
Powell stated that the Fed does not intend to add Bitcoin to its balance sheet.
"We cannot hold Bitcoin. (The Federal Reserve Act) specifies what we can own, and we have no intention of seeking to amend the law. This is something for Congress to consider, but we at the Fed have not sought to change it," Powell said.
(Financial Associated Press, Xia Junxiong)