Monday, April 21, 2025

Fed Chair Powell Hints at Slower Rate Cuts as Economy Stays Strong

Reuters
Reuters

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), signaled that the Fed’s rate cuts would proceed slowly over time.

With the Fed’s final Federal Open Market Committee (FOMC) meeting of the year scheduled for December 17-18, Powell made it clear that the Fed would not rush to lower rates.

Speaking at a New York Times event, Powell noted that the U.S. economy appears to have improved since the September rate cut, affording the Fed the flexibility to slow the pace of rate reductions.

The Fed initiated this easing cycle with an unusual 0.5% point cut in September during the September FOMC meeting. At the FOMC meeting on November 6-7, they also decided to lower rates by an additional 0.25% point, bringing the benchmark rate down to 4.50%—4.75%.

Despite signaling a slower pace of rate cuts, the financial markets are almost certain that the Fed will lower rates by an additional 0.25% point on December 18.

According to the CME Group’s FedWatch tool, futures traders predict a 75.5% probability of the Fed implementing a 0.25% point cut, which would lower the benchmark rate to 4.25%—4.50%.

However, expectations for next year have shifted. Forecasts now point to two 0.25 percentage point cuts, totaling a 0.5 percentage point reduction, down from earlier projections of three cuts.

Powell emphasized that the robust U.S. economy has alleviated the need for immediate action to stimulate growth, allowing the Fed to take a more cautious approach in determining the neutral interest rate. Experts generally consider a neutral interest rate of around 4%, a level that neither fuels nor hinders economic growth.

Yet, Powell cautioned that his remarks should not be interpreted as a shift towards a tighter monetary policy stance.

Powell emphasized, “The Fed wants to send a strong signal that it will support the labor market if it continues to show signs of weakness.”

While the Fed was initially expected to embark on aggressive rate cuts starting in September, market expectations have shifted following President-elect Donald Trump’s election victory on November 5.

Trump, a strong advocate of high tariffs, has pledged to raise tariffs immediately upon taking office on January 20. This move is expected to drive up import prices and fuel inflation.

Additionally, Trump has committed to deport a large number of undocumented immigrants, a policy that could significantly increase U.S. labor costs.

With tariffs and deportation at the forefront of Trump’s agenda, concerns about a potential resurgence in U.S. inflation are mounting.

Hot this week

Netflix’s Revenue Jumps 13% in Q1, Driven by Price Hikes and Ad Growth

Netflix's Q1 revenue hit $10.54B, beating estimates, driven by subscriber growth and ad revenue, with a focus on innovative advertising tech.

Eli Lilly’s Stock Rockets 14% as Dow Declines for Third Straight Session

U.S. stock market ends mixed ahead of Easter, with Eli Lilly soaring while Nvidia and UnitedHealth decline amid trade tensions.

WTI Jumps 3.5% as U.S. Sanctions on Chinese Refiners Tighten Supply

Oil prices surged as U.S. sanctions on Chinese firms raise supply concerns, pushing Brent and WTI prices higher ahead of Easter.

Foldable iPhone Incoming: 7.76-Inch Display, Samsung Panel, $2K+ Price

Apple is rumored to launch a foldable iPhone next year, priced between $2100-$2300, exceeding Samsung's foldable models.

Oil Prices Jump Nearly 2% After U.S. Sanctions Chinese Refineries

Oil prices surged over 1.8% amid supply concerns after U.S. sanctions on Chinese refineries importing Iranian oil.

Topics

Netflix’s Revenue Jumps 13% in Q1, Driven by Price Hikes and Ad Growth

Netflix's Q1 revenue hit $10.54B, beating estimates, driven by subscriber growth and ad revenue, with a focus on innovative advertising tech.

Eli Lilly’s Stock Rockets 14% as Dow Declines for Third Straight Session

U.S. stock market ends mixed ahead of Easter, with Eli Lilly soaring while Nvidia and UnitedHealth decline amid trade tensions.

WTI Jumps 3.5% as U.S. Sanctions on Chinese Refiners Tighten Supply

Oil prices surged as U.S. sanctions on Chinese firms raise supply concerns, pushing Brent and WTI prices higher ahead of Easter.

Foldable iPhone Incoming: 7.76-Inch Display, Samsung Panel, $2K+ Price

Apple is rumored to launch a foldable iPhone next year, priced between $2100-$2300, exceeding Samsung's foldable models.

Oil Prices Jump Nearly 2% After U.S. Sanctions Chinese Refineries

Oil prices surged over 1.8% amid supply concerns after U.S. sanctions on Chinese refineries importing Iranian oil.

Semiconductor Rout Sends Nasdaq Down 3%, S&P Falls 2.2%

The New York stock market plunged due to semiconductor export regulations and stagflation concerns, impacting major tech stocks.

‘Buy British’ Is Trending Again—Here’s What’s Driving It

A survey shows 71% of Britons support buying local products amid concerns over U.S. tariffs and rising living costs.

Markets Wobble After Three-Day Rally—Boeing Tumbles, Tesla Shrugs Off Chart Alarm

U.S. stock indices fell as concerns over Trump's tariffs lingered, while Tesla and Nvidia showed resilience despite market declines.

Related Articles