Wed, April 03, 2024 at 16:17

• 

  Kang-hoon

  • Hello Annie, today's news is about the Federal Reserve Chair Jay Powell's recent comments on inflation and interest rates.

  • He reiterated his belief that inflation is on a 'bumpy' path down to 2% and that central bank officials expect to lower rates at 'some point' this year.

  • 
• Annie

  • Oh, really?😮 That's interesting.

  • So, what does this mean for the economy?

  
• 

  Kang-hoon

  • Well, Powell's comments suggest that despite some hotter-than-expected inflation readings at the start of the year, the overall outlook hasn't changed much.

  • He emphasized that such data do not 'materially change the overall picture,' which he described as one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent.

• Annie

  • Hmm...so the inflation isn't as bad as some people thought?🤔

  
• ADward

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• 

  Kang-hoon

  • That's correct.

  • The Fed's preferred inflation gauge, the Personal Consumption Expenditures index, showed a slight cooling last Friday.

  • This was in line with what the Fed wants to see.

• Annie

  • I see.

  • And what about the interest rates?

  • Are they going to be lowered soon?

  
• 

  Kang-hoon

  • Powell did predict cuts this year, but he also said it's 'too soon' to determine whether the hot readings on inflation are more than just a 'bump.'

  • He reiterated that officials don't expect to lower rates until they gain more confidence inflation is decisively dropping to 2%.

• Annie

  • Got it.

  • So, they're waiting to see how things go before making a decision?

  
• 

  Kang-hoon

  • Exactly.

  • Powell emphasized that given the strength of the economy and progress on inflation so far, they have time to let the incoming data guide their decisions on policy.

• Annie

  • Makes sense.

  • But what about the political pressure?

  • I heard there's a lot of that going on.😕

  
• 

  Kang-hoon

  • Yes, there is.

  • Both Democrats and Republicans are trying to influence Powell and the Fed as the November election draws closer.

  • Democrats tend to want cuts as soon as possible, while Republicans generally want Powell to take it slow.

• Annie

  • And how is Powell responding to all this?

  
• 

  Kang-hoon

  • Powell has made it clear that the Fed's decisions are not swayed by elections.

  • He said, 'Fed policymakers serve long terms that are not synchronized with election cycles.

  • This independence both enables and requires us to make our monetary policy decisions without consideration of short-term political matters.'

• Annie

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

  
• 

  Kang-hoon

  • In my opinion, this news might be seen as negative for the market.

  • The uncertainty around interest rate cuts and inflation could lead to volatility in the market.

  • 

  • Also, if the Fed decides to delay rate cuts, it could affect borrowing costs and slow down economic activity.

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