Tue, July 02, 2024 at 16:59

• 

  Kang-hoon

  • Hello, Annie.

  • Today, I have some important news regarding the U.S. Federal Reserve and its stance on inflation.

  • 
• Annie

  • Oh, interesting!

  • What did they say?😊

  
• 

  Kang-hoon

  • Federal Reserve Chairman Jerome Powell praised the recent progress in slowing inflation in the U.S.

  • However, he emphasized the need for greater certainty before cutting interest rates.

• Annie

  • So, they are not cutting interest rates yet?🤔

  
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• 

  Kang-hoon

  • Correct.

  • During a panel discussion at a forum hosted by the European Central Bank in Sintra, Portugal, Powell mentioned that while the latest inflation indicators suggest a return to a disinflationary path, more certainty is needed.

• Annie

  • What kind of indicators are they looking at?

  
• 

  Kang-hoon

  • They are looking at various indicators, including the personal consumption expenditures (PCE) price index and the consumer price index (CPI).

  • For instance, the Commerce Department reported on May 28 that the PCE price index rose 2.6% year-over-year in May.

• Annie

  • And how did the CPI fare?

  
• 

  Kang-hoon

  • The CPI growth in May improved to 3.3% from a year earlier.

  • This improvement has boosted market expectations that the Fed could start cutting interest rates in September.

• Annie

  • But Powell still wants more certainty?

  • Why is that?

  
• 

  Kang-hoon

  • Indeed.

  • Powell stated that while progress has been made, they need greater assurance that inflation will continue to slow towards their 2% target before they can begin easing monetary policy.

• Annie

  • I see.

  • So, what does this mean for the market?

  
• 

  Kang-hoon

  • In the short term, it means that the market should not expect immediate rate cuts.

  • The Fed is likely to maintain its current policy stance until they are more confident about the inflation trajectory.

• Annie

  • That makes sense.

  • But isn't this uncertainty bad for the market?

  
• 

  Kang-hoon

  • Yes, it can be.

  • Uncertainty often leads to market volatility as investors react to potential changes in monetary policy.

  • 

  • This could result in fluctuations in stock prices and bond yields.

• Annie

  • So, in your opinion, is this news good or bad for the market?

  
• 

  Kang-hoon

  • I would categorize this as bad news for the market.

  • The lack of immediate rate cuts and the emphasis on needing more certainty can create a cautious atmosphere among investors, potentially leading to increased volatility.

• Annie

  • Got it.

  • Thanks for the detailed explanation, Kang-hoon!🙏

  
• 

  Kang-hoon

  • You're welcome, Annie.

  • Always here to help you understand the complexities of the market.

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.