Why isn't the Fed ready to cut interest rates?

Federal Reserve Chairman Jerome Powell reiterated his expectation that interest rates will begin to fall this year, but did not give a specific timeframe. Powell stated that policymakers are still considering the risks posed by inflation and do not want to cut interest rates too quickly.

The Fed is not yet ready to cut interest rates. (Illustrative image)

Soon after, comments indicated that officials remained concerned about undoing the progress made in combating inflation and would base decisions on aggregated data rather than a predetermined roadmap.

Powell reiterated that lowering interest rates too quickly risks undoing gains in the fight against inflation and potentially necessitating further rate hikes, but waiting too long would also jeopardize economic growth.

Investors are currently betting that the first interest rate cut will occur in June and that there will be 3-4 rate cuts this year. Policymakers will release updated interest rate forecasts at the Fed's meeting this month.

US economic activity increased slightly.

A recent Fed report shows that the US economy has grown slightly since the beginning of the year, with eight regions reporting moderate to moderate growth, three regions reporting no change, and one region recording a slight decline in economic activity.

The US economy is growing slightly. (Illustrative image).

The report also indicated that consumer spending, particularly retail, has decreased slightly in recent weeks; businesses are finding it more difficult to pass on higher costs to customers. Furthermore, raw material costs for many manufacturers and construction companies have fallen in recent weeks.

Regarding the labor market, employment in most regions continued to grow, but at a modest pace. Many economists expect the labor market to cool down this year.

However, the Labor Department's January jobs report showed employers raised wages the most in a year. More restrained labor costs are likely to further ease the unexpected surge in inflation earlier this year.

PHAM DUY

Source: https://vtcnews.vn/vi-sao-fed-chua-san-sang-cat-giam-lai-suat-ar858707.html