US Federal Reserve Chairman Jerome Powell said that inflation is going higher and is elevated after the Fed announced a 0.25% interest rate cut from 4.5% to 4.25%. The Fed will also continue to reduce its balance sheet by reducing its Treasury holdings, agency’s debt and agency mortgage-backed securities. You can read the Fed’s statement here.
Fed Chair Powell said that the labour market is slowing down and the unemployment rate is edging up due to supply and demand constraints. Tariffs are also increasing the price of goods. However the Fed has also increased its economic growth projections for 2025 raising the range of growth to 1.4 – 1.7%.
The Fed Chair also said that a 0.5 basis points cut is more unlikely today after the Fed had to make big cuts or big increases during more volatile periods. He described the latest cut as a risk-management cut and the risks pushing inflation higher are also going down.
With the current’s Fed position, Chair Powell said that the Fed would be in a good position to respond if unexpected events occur.
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