Federal Reserve Chair, Jerome Powell, recently addressed the public for the first time since the Fed’s preferred inflation gauge indicated that prices experienced their slowest increase in over three years in the month of May. Powell acknowledged the cautious stance but also noted that recent data has been moving in the right direction.
Powell expressed his optimism about the decrease in inflation but emphasized that the central bank would require more evidence before considering a cut in interest rates. Speaking at a European Central Bank conference in Portugal, Powell stated that the inflation readings from April and May indicated a return to a disinflationary trend.
The latest core Personal Consumption Expenditures (PCE) index for May showed a 2.6% increase, meeting expectations and down from April’s 2.8%. Additionally, the month-over-month inflation measure rose by 0.1%, aligning with expectations and a decrease from the 0.2% in April. These figures have supported the possibility of rate cuts later in the year, addressing concerns that arose in the first quarter regarding unexpectedly high inflation impacting monetary policy.
Despite the positive signs of easing inflation, the Federal Reserve is not expected to reduce rates at its upcoming meeting in late July. Powell refrained from commenting on the potential for a rate cut in September, emphasizing the need for additional time and evidence to ensure that inflation is consistently moving towards the 2% target. He noted that the strong job market, although gradually cooling, allows the Fed to exercise patience in its decision-making process.
As Powell stated, significant progress has been made, but it is essential to gain a deeper understanding of the true levels of underlying inflation before making any substantial changes in monetary policy. The Extreme Investor Network encourages investors to monitor these developments closely for potential implications on their investment strategies. Stay informed and stay ahead with Extreme Investor Network.