Interest rates have been cut by 25 BP by Federal Reserve as Jerome Powell sizes up election results and current state of inflation.
Jerome Powell, Chairman of the Federal Reserve, has stated that the U.S. economy is in robust health, yet acknowledges that the populace continues to grapple with the repercussions of elevated prices. This sentiment was particularly resonant among swing voters during the presidential election, where concerns over inflation and economic stability significantly influenced voting behavior, ultimately contributing to Donald Trump's re-election.
Inflation has notably decreased from its peak a few years back, with current price increases hovering just above 2% annually. Powell highlighted that for Americans to feel financially secure again, wages must increase sufficiently to outpace inflation, which could take several years. He emphasized that it would require sustained real wage growth for public confidence to recover.
Powell made it clear that the Federal Reserve's upcoming decisions on interest rates would not be swayed by the election outcomes in the immediate future. He stressed the Federal Reserve's independence, stating that economic policy would continue to be driven by economic data rather than political events. This stance aims to maintain the stability and predictability of monetary policy.
Looking forward, Powell expressed caution about making long-term economic forecasts, citing the unpredictability of future policy changes under new leadership. He noted that the effects of any policy shifts by the new administration are uncertain, which adds to the complexity of predicting economic trends beyond the short term. This uncertainty underscores the Fed's approach to remain data-dependent in its policy-making.
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