Powell Optimistic About Rate Cuts

last updated on

Powell Optimistic About Rate Cuts

Fed Powell Raises Optimism On Interest Rate Cuts

The Asian session on Wednesday is risk-on after the comments from the US Federal Reserve chairman Jerome Powell. The comments from the Fed official have once again sparked optimism that the rate cuts are actually happening in 2024.

Elsewhere, the French elections remain a key risk for the French economy and even the European Union as a whole. For now, the EU is sitting at a two-week high while the STOXX 600 index is at 2-month lows, which highlights the severity of the situation.

Powell Shows Confidence In Disinflation Trend

Back in the USA, Fed Powell made it clear that the disinflation path is still intact. This was enough to send the USD lower and put it into defensive mode against other G10 currencies. Additionally, the bond yields also turned lower as the prospects of rate cuts have increased manifolds.

While Powell talked about the disinflation trend, he also added that more solid data is needed before the central bank can decide on cutting rates in 2024.

According to Powell, the central bank wants to make sure that the inflation levels they are seeing are real and not a one-time event. Once this is confirmed, the decision to cut the rates will become easier for the Federal Reserve.

That's why we can say that the rate cuts depend on the incoming data from the USA. This also means the next few readings of inflation in the USA will become very important. For now, the forecast is for 2 rate cuts this year which was initially 3 at the start of the year.

Later today, the meeting minutes for June will be released which could shed more light on how the Fed is adjusting its rate policy.

Meanwhile, the European Central Bank is also in a hurry to cut rates after last month's rate cut. Additionally, the incoming data shows that the Euro Zone inflation is still pretty high.

Trending Stories