Fed chair's comment makes rate cut 'uncertain'

Will the Fed cut interest rates after Jerome Powell’s latest comments?

Federal Reserve Chair Jerome Powell’s recent comments have cast doubt on the possibility of an interest rate cut in the near future, sending markets into a tailspin and leaving economists scratching their heads.

In a speech on Wednesday, Powell said that the central bank was “closely monitoring” the economy and would “act as appropriate” to support growth and keep inflation in check.

However, he also noted that the Fed was “not on a preset course” and would “take into account the full range of incoming data” before making any decisions about interest rates.

What the Fed said and unsaid

Powell’s comments were a departure from his previous tone, which had been more dovish and had led markets to expect a rate cut in the near future.

In his speech, Powell acknowledged that the economy had slowed in recent months, but he also said that the labor market remained strong and that inflation was still under control.

He added that the Fed was “prepared to adjust policy if necessary” but that the central bank would not “overreact” to short-term fluctuations in the economy.

Market reaction

Powell’s comments sent markets tumbling, with the Dow Jones Industrial Average falling more than 500 points on Wednesday.

Investors were disappointed by Powell’s lack of commitment to a rate cut and worried that the Fed was becoming more hawkish.

The yield on the 10-year Treasury note also rose, reflecting investors’ expectations of higher interest rates in the future.

What’s next?

It is now unclear when the Fed will next cut interest rates.

Powell said that the central bank would “continue to monitor the economy closely” and would “make decisions based on the data.”

Economists are divided on whether the Fed will cut rates in the near future. Some believe that the central bank will wait to see more data on the economy, while others believe that the Fed will cut rates sooner rather than later to support growth.