Jerome Powell Gave His Answer on Potential Rate Cuts

Jerome Powell's testimony infront of the US Congress gave some insight into the Federal Reserve's current stance on rate cuts.

Federal Reserve Chair Jerome Powell says data does not support the greater confidence in inflation path to 2% that the US central bank needs to cut rates.

In other words it is still early to think about rate cuts, despite analysts’ positive predictions. Earlier forecasts showed confidence in a potential rate cut in September.

The Fed chair also said cutting rates too soon or too much could stall or reverse inflation progress. This decision is fundamental not just for the US economy, but for most markets, including crypto.

If Powell decides to lower the rates for the first time this year, this could be a very bullish signal for the stock and crypto markets.

Powell called the labor market “strong, but not overheated,” adding that the central bank’s restrictive stance is working to bring supply and demand into better balance.

“Another increase in the jobless rate in the July report could challenge our base case of one rate cut this year in December, raising the possibility of two cuts starting in September,” said Yelena Shulyatyeva, senior economist at BNP Paribas.

The probability of interest rates remaining constant in July is at 95.3%, while a 25 basis point reduction in the meeting on September 18 is forecasted around 73.6%, according to data from FED Watch.

Powell also stated that a hike in interest rates is highly unlikely, although probable.