Powell reiterates that rate cuts should happen this year

During its testimony today, Jerome Powell, the Chair of the Federal Reserve, suggested that interest rate cuts are likely this year if the economy performs as expected. As a result, the three main U.S. stock indexes opened in the green. Speaking to the House Financial Services Committee, Powell cautioned that the fight against inflation is ongoing.

"If the economy evolves as expected, it will probably be appropriate to begin easing monetary policy at some point this year," he said. "But the economic outlook is uncertain, and continued progress toward our 2% inflation goal is not assured." He warned about the risk of cutting rates too soon, which would trigger a further acceleration in inflation. However, he added that keeping monetary policy too tight for too long would also harm activity.

 

Jerome Powell said that inflation had "come down considerably" since 2022, but that policymakers still needed "greater confidence" that prices are sustainably slowing before cutting rates.

After Powell's inflation warning, the 10-year Treasury note yield fell to 4.0981%, and the 30-year bond yield decreased to 4.2526%. Powell will conclude his testimony with an appearance before the Senate Banking Committee on Thursday.