Fed officials will meet this week, with a statement likely to suggest they have seen significant progress on inflation this year - a precursor to interest rate cuts.
However, it is difficult to say for sure, as the officials themselves may not know for sure until they begin their meetings. That's because the government's latest flash report on US inflation will be released at 7:30 p.m. on June 12, just before the Fed begins its second day of policy discussions.
One key issue is a sentence the Fed added to its statement after its last meeting on May 1: It said “there has been a lack of further progress” in bringing inflation back to its 2% target. of the central bank.
Inflation has reached uncomfortably high levels in the first three months of this year, dimming hopes that it will continue to cool steadily as it did in the second half of last year.
However, in April, consumer inflation continued to decline, albeit only slightly. And if the May inflation report released on Wednesday shows further signs of improvement, there's a chance the Fed could remove that sentence from its statement. This will be an encouraging sign that policymakers may cut their benchmark interest rates in the next few months. The interest rate cuts will ultimately lead to lower costs for mortgages, auto loans and other forms of consumer and business loans.
But whether or not this sentence is removed or changed, most economists say a rate cut before September at the earliest is unlikely. Chairman Jerome Powell is likely to emphasize at a news conference on Wednesday that policymakers will need to see several more months of low inflation figures before they consider reducing their key interest rate.
The Fed's rate cut could give the economy a bit of a boost, which would be welcomed by President Joe Biden's re-election campaign, which is having difficulty dealing with uncertainty. satisfaction of many voters about increasing inflation in recent years. While consumer inflation has fallen significantly since peaking at 9.1% in mid-2022, it remained at 3.4% in April, well above the Fed's target.
The Fed will cut interest rates more quickly if growth slows and companies lay off many workers. But on Friday, the government reported a strong jobs growth in May, with employers in many industries adding jobs. The report led Wall Street traders to downgrade their forecast for a Fed rate cut to just one this year, from two.
The Fed is expected on Wednesday to keep its benchmark interest rate unchanged at about 5.3%, a 23-year high, where it has stood since July. Policymakers will also give Updated economic forecasts are expected to show they envision one or two interest rate cuts by the end of the year, down from a forecast of three in March.
At his press conference, Powell will likely reiterate that Fed officials need more confidence that inflation is returning to 2% before they consider cutting interest rates, and this will require additional time.
“The Fed's story will be very similar to what we've heard: 'We've made progress reducing inflation; we are in no rush to cut interest rates,'” said Nathan Sheets, a former senior economist at the Fed who is now global chief economist at Citi.
Another issue Powell could address is whether the economy is starting to weaken. Growth fell sharply in the first three months of the year, to an annual rate of just 1.3%, down from 3.4% in the final quarter of last year.
The number of open jobs fell in April to a three-year low, though the number remained high by historical standards. And consumers actually cut their spending in April, after adjusting for inflation, a sign that high prices and high interest rates are putting pressure on Americans' finances.
While solid jobs growth in May helped ease some of those concerns, the unemployment rate rose slightly for the second straight month, to 4%.
Such signs of weakness could help clarify an ongoing debate among Fed officials: Exactly how much are higher interest rates hurting the economy? Policymakers have raised borrowing costs over the past two years with the goal of slowing spending enough to curb inflation.
With strong growth last year and significant job growth earlier this year, some officials have begun to doubt that their interest rates are high enough. Minutes of the Fed's most recent meeting showed that some officials even appeared ready for further interest rate hikes.
A cooling economy “will reinforce their narrative that (interest rate) policy is restrictive,” said Donald Kohn, a former vice chairman of the Fed Board of Governors who is now a senior fellow at the Brookings Institution. know. “This is something that everyone has been doubting – including me – for a while when things were going very strong.”
Last month, John Williams, president of the New York branch of the Fed, said there was “clear evidence” that higher interest rates were restraining the economy. Home sales have plummeted. And spending on home appliances, furniture and other high-priced items has slowed.
The Fed's cautious approach to interest rate cuts differs from some of its counterparts abroad. On Thursday, the European Central Bank announced its first interest rate cut in five years, citing progress in slowing price increases. Inflation has fallen from a peak of 10.6% to 2.6% in the 20 countries that use the euro.
The Bank of Canada also reduced interest rates last week. The Bank of England will meet on Thursday, although it is unclear whether they will cut. The Bank of Japan is the only major central bank to have raised interest rates, which it did in response to rising prices after decades of deflation.
And most of all, the crypto community is also holding its breath waiting for the Fed's move to lower interest rates, which analysts believe will take Bitcoin to a new all-time high.
Source: https://tapchibitcoin.io/du-lieu-lam-phat-tuan-nay-co-the-help-xac-dinh-thoi-gian-cat-giam-lai-suat-cua-fed.html
