During his speech at the Jackson Hole Economic Symposium, Jerome Powell hinted that the US Federal Reserve (FED) could begin a rate cut in September. After a year of stagnation, this would be the first cut after 11 consecutive rate hikes.
Jerome Powell could announce a rate cut on September 18
Speaking Friday at the Jackson Hole Economic Symposium, the annual gathering of central bankers from around the world, Jerome Powell, Chairman of the US Federal Reserve, spoke out in favor of a rate cut.
While these key rates have been maintained at 5.5% for over a year now, this follows 11 consecutive increases following the surge in inflation and monetary policy during the Covid-19 pandemic:
Figure 1 – Evolution of Fed rates over the last 3 years
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During his speech, Jerome Powell expressed confidence regarding inflation, which is on the ” sustainable path to return to 2% ” according to him. Thus, this would justify future reductions, although these have not yet been acquired:
The time has come for a policy adjustment. […] The direction to take is clear, the pace of rate cuts will depend on upcoming data, the evolution of the outlook and the balance of risks.
After this intervention, the market now expects a rate cut of 25 to 50 basis points for 76%, and 50 to 75 basis points for 24%. Under this scenario, rates could thus be reduced at a level between 4.75% and 5.25% on September 18 :
Figure 2 – Estimates of the evolution of the FED's key rates on September 18
In terms of inflation, The United States posted a level of 2.9% last July compared to 3% in June. This constitutes the 4th consecutive month of decline.
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For comparison, the European Union, for its part, began its first rate cut in 8 years last June. These are now set at 4.25%.
As for the United States, we now have to wait until September 18 to find out the FED's decision.
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Sources: Trading Economics, CME
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Since 2021, I have devoted my free time to seriously training myself on cryptocurrencies in order to acquire as much knowledge and credibility as possible. I often have the opportunity to conduct interviews with influential figures in the blockchain industry. I also conduct in-depth analyses on Web3 themes to offer exclusive content to Cryptoast readers.
Vincent Maire
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