According to Powell, the federal funds rate is likely at its peak, and Fed will start cutting rates sometime this year. As usual, Fed is prepared to keep rates at high levels if appropriate. The Fed will slow the pace of sales from its balance sheet to prepare money markets for the upcoming rate cuts.
Interestingly, Powell talked about two-sided risks of being too hawkish or too dovish. The Fed has a dual mandate of targeting inflation and maintaining maximum employment and wants to strike a balance between these two goals.
Powell that recent inflation data did not show anything dramatic, and that he believed that data showed that inflation was still moving lower. This is an important comment as traders worried that recent inflation data could change Powell’s view on current inflation trends.
When asked about higher federal funds rate projections for 2025 and 2026, Powell said that rates would not get back to the very low levels that were seen before Fed…
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