The Chairman of the US Federal Reserve, Jerome Powell, once again did not provide a clear signal for an imminent interest rate cut. "I will avoid giving signals about our interest rate policy today," Powell said on Tuesday during a hearing before the US Senate. The latest inflation data indicated "modest, further progress" in price development. "More good data" would strengthen confidence that inflation is sustainably approaching the US Federal Reserve's target value. The Fed aims for an inflation rate of two percent.
Powell emphasized that a rate cut that is too small or too late could jeopardize economic development and the labor market. On the other hand, a rate cut that is too early or too strong could stifle or reverse progress on inflation. Recently, the Fed has kept the key interest rate unchanged for the seventh consecutive time in the range of 5.25 to 5.5 percent.
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"Powell also commented on the labor market, which had recently weakened. It 'seems to be completely in balance again.' The latest data is 'a fairly clear signal that conditions in the labor market have significantly cooled.'
Elmar Völker, economist at Landesbank Baden-Württemberg, commented: "The top US monetary policymaker continues to keep his cards close to his chest regarding how long the Fed intends to maintain the current interest rate level." Economic prospects have recently dimmed. "Nevertheless, the next Fed rate decision on July 31 comes too soon for a rate cut," writes Völker. "If the indicators for a noticeable economic slowdown solidify in the coming weeks, the Fed meeting in September would from today's perspective be a suitable starting point for a phase of monetary easing.
The statements made by Powell illustrate the cautious stance of the Fed at a time when economic signals are mixed. While inflation is gradually decreasing, uncertainty about future economic developments remains. Investors and analysts are therefore closely monitoring upcoming economic data and the next steps of the Federal Reserve.
