Powell Signals Two More Rate Cuts in 2024, Pending Economic Data

Powell: Fed Plans Two More Rate Cuts in 2024 if Economy Develops as Expected

In a speech to the National Association for Business Economics, Federal Reserve Chairman Jerome Powell hinted at two additional interest rate cuts by the end of 2024, contingent on the continued development of the U.S. economy. Powell emphasized that the Federal Reserve is carefully monitoring economic data, particularly job reports and inflation, before making any final decisions.

Powell’s remarks come at a critical time as the U.S. economy continues to show signs of resilience, with a strong labor market and positive progress toward the Fed’s inflation target of 2%. Despite these encouraging signs, Powell made it clear that the Federal Reserve will not rush to implement these rate cuts, explaining that the timing of any changes will be driven by data.

Two More Rate Cuts Expected in 2024

Chairman Powell indicated that if economic conditions continue to develop as expected, the Federal Reserve plans to reduce interest rates by 50 basis points—with each rate cut likely being 25 basis points—before the end of the year. This would bring further relief to markets that have been facing tighter financial conditions due to a series of rate hikes aimed at controlling inflation over the past year.

Powell, however, stressed that the Fed’s approach remains data-dependent, saying, “We are watching the data closely and will decide the appropriate course of action based on upcoming reports.” This cautious tone signals that the Fed is taking a measured approach to ensure that inflationary pressures are adequately managed while also supporting the economy’s growth.

Key Economic Data to Watch Before November

The Fed is set to receive two key jobs reports and an inflation report before its next meeting in November, all of which will play a significant role in determining the Fed’s rate decision. Powell explained that the November decision will be largely informed by these data points, as they provide a clear picture of how the U.S. economy is performing relative to the Fed’s targets.

“Everything will be decided based on data,” Powell noted, underscoring the importance of the upcoming economic indicators. The Fed’s focus remains on balancing inflation while maintaining healthy employment levels, both of which are crucial in setting the stage for any future rate cuts.

U.S. Economy and Labor Market Remain Strong

Powell also highlighted the continued strength of the U.S. labor market, stating that employment levels remain robust and balanced. Despite ongoing global economic uncertainties, the U.S. has managed to sustain job growth, which is a key factor in the Fed’s decision-making process.

“The U.S. economy is doing well,” Powell asserted, adding that the labor market’s current performance supports the case for potential rate cuts in the coming months. Recent economic data has pointed to further progress in the Fed’s efforts to bring inflation down to its 2% target, bolstering confidence that the central bank’s tightening measures have been effective.

Balancing Inflation Control and Economic Growth

The Federal Reserve has been navigating a delicate balance between controlling inflation and supporting economic growth. In recent months, inflation has shown signs of receding, and Powell acknowledged that the economy is making additional progress toward achieving the Fed’s inflation goals. This progress has led the Fed to consider loosening monetary policy if the current trajectory holds.

While Powell reiterated the Fed’s commitment to inflation control, he also emphasized the need to avoid stifling growth by keeping interest rates too high for too long. The possibility of rate cuts reflects the Fed’s evolving strategy as it seeks to support both price stability and a thriving labor market.

Market Reactions and Investor Sentiment

Markets have been closely watching the Fed’s actions and Powell’s comments, and the expectation of future rate cuts has been met with cautious optimism. Lower interest rates could potentially provide a boost to risk assets such as stocks and cryptocurrencies, which tend to perform better in a low-rate environment. However, Powell’s insistence that the Fed will proceed cautiously has tempered market exuberance, as investors wait for further clarity from upcoming data releases.

With the economy performing well and inflation appearing to be under control, the prospect of rate cuts has sparked interest in “buy-the-dip” strategies, particularly in markets that have been impacted by the Fed’s earlier rate hikes. However, Powell’s comments suggest that the Fed will only act if the data supports such a move, meaning that investors should brace for potential volatility as the November meeting approaches.

Conclusion: Fed’s Path Forward Remains Data-Driven

Chairman Powell’s remarks underscore the Federal Reserve’s cautious yet optimistic outlook for the U.S. economy as it considers two more interest rate cuts before the year ends. The Fed’s decisions will hinge on key economic indicators, particularly jobs and inflation reports, which will provide critical insights into whether the economy is developing as expected.

As Powell stated, the Fed will “not rush” to cut rates, and any action will be based on a thorough assessment of incoming data. The U.S. economy’s strong performance thus far, particularly in the labor market, suggests that the Fed’s plan for rate cuts remains on track, but the outcome of upcoming reports will be crucial in shaping the central bank’s next steps.

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To learn more about how the Federal Reserve’s rate cuts could impact cryptocurrency markets, check out our latest article on crypto trends and monetary policy, where we discuss the potential ripple effects on Bitcoin and other digital assets.