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Powell hints at longer rates amid inflation concerns, casting doubt on potential cuts

Federal Reserve Chairman Signals Caution on Rate Cuts

Fed Chair Powell Stresses Need for Confidence in Inflation Data

Federal Reserve chairman Jerome Powell expressed caution on cutting rates, citing the recent inflation data as insufficient to instill confidence. He emphasized the necessity for a sustainable path to lower inflation before considering rate adjustments.

Policy Positioned to Handle Risks, Says Powell

Powell reassured that the Fed’s policy is well-prepared to manage potential risks, alleviating concerns of imminent rate hikes. He noted the importance of maintaining a balanced approach while acknowledging the challenges ahead.

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Risk of Higher Rates Looms, but Not Base Case Scenario

Analysts at UBS warned of a possible increase in rates to 6.5% next year, citing persistent economic growth. However, they clarified that such a scenario was not their primary expectation, highlighting uncertainties in the market.

Inflation Data Points to Prolonged Higher Rates

Powell indicated that the recent inflation figures suggest a need for continued restrictive policies to achieve the target of 2% inflation sustainably. He emphasized the importance of allowing time for the current measures to yield desired results.

Labor Market Shows Signs of Normalization

Despite challenges, Powell noted improvements in the labor market, with demand for workers being met by an expanding workforce. He highlighted the balance achieved over the past year, signaling a positive trend in employment dynamics.

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Room for Rate Adjustment in Case of Market Deterioration

While acknowledging the current rate levels, Powell mentioned the possibility of easing policies if the labor market experiences significant setbacks. This flexibility ensures a proactive approach to potential economic challenges.

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