Deutsche Bank economists have stated that a rate cut in September is highly likely, with the specific magnitude remaining up in the air. They predict that the size of the rate cut will be heavily influenced by labor market data. The current stance is that there will be a 25 basis points rate cut at the upcoming September meeting, followed by further cuts at future meetings.
Federal Reserve Chair Jerome Powell hinted at potential rate cuts during his speech at the Jackson Hole conference. While he did not provide concrete details about timing or the extent of the cuts, Powell did mention that adjustments in policy are imminent. He emphasized that the decision will be based on incoming data, economic outlook, and risk assessment.
Although there was a high level of anticipation regarding announcements on monetary policy, Powell used a considerable portion of his speech to reflect on factors that led to a surge in inflation in the past. He acknowledged the progress made in reducing inflation and highlighted the shift towards focusing on maintaining full employment, which is part of the Fed’s dual mandate.
Powell reiterated the Fed’s dedication to achieving both a robust labor market and steady progress in inflation rates. He assured that all efforts would be made to work towards these objectives. The recent inflation data has been moving closer to the Fed’s target of 2%, with the most recent figure at 2.5%. Unemployment rates have also seen some fluctuations, but Powell attributed these changes to specific factors like increased workforce participation and slower hiring processes.
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