Federal Reserve Chairman Jerome Powell indicated recent high inflation is making it less likely that interest rates will be cut in the coming weeks and months.
Powell, speaking during a question-and-answer session in Washington, D.C., emphasized that the hotter-than-desired inflation reports over the past quarter have not provided the Fed the confidence it needs that price pressures are abating. Powell’s remarks are an acknowledgement of a recent major shift in expectations from investors regarding interest rates.
The Fed chief noted the underlying strength of the country’s labor market — something that has given the Fed more leeway to keep interest rates higher for longer if need be. The economy added 303,000 jobs in March, a number that exceeded expectations. “Fed Chair Powell moved more decidedly in a hawkish direction as he essentially underscored that the downward trajectory of inflation has essentially stalled,” Krosby said. “Moreover, he made it clear — rather than his more ambiguous stance regarding a rate easing timetable — that the ‘higher for longer’ narrative remains intact.”
There is also nearly 1 in 4 odds that there won’t be a rate cut until sometime after the November elections, up from just 3.4% a month ago.
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