Eastern time on Wednesday (December 18), Federal Reserve Chairman Powell said at a press conference after the interest rate meeting that the Federal Reserve is at or close to the moment of slowing interest rate cuts, and will make a decision to cut interest rates next year based on data, it seems unlikely to raise interest rates.
The Fed cut interest rates by 25 basis points on Wednesday, in line with market expectations, lowering the target range for the federal funds rate to 4.25% to 4.5%. It was the Fed’s third straight rate cut, following cuts of 50 basis points in September and 25 basis points in November.
The latest interest rate dot plot shows policymakers expecting two rate cuts in 2025, up from four in September.
Although the December rate cut was finally made, Powell claimed it was a difficult but correct decision.
Moving too slowly could unnecessarily weaken economic activity in the labor market, while moving too quickly could hurt the Fed’s progress in controlling inflation, he noted. So the Fed is trying to find a balance between the two risks.
On future monetary policy actions
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Powell said that after this rate cut, the Fed has reduced the policy rate by a full 100 basis points from the peak, and the monetary policy stance is now significantly less restrictive than before, so policymakers can be more cautious when considering more rate adjustments.
Regarding future monetary policy actions, Powell said that any Fed rate cut decision in 2025 would be based on upcoming data, not current economic conditions.
Because the Fed is trying to keep the labor market strong while bringing inflation down to 2 percent, a rate hike next year seems unlikely, he said.
Affirming the performance of the US economy
Powell affirmed the performance of the U.S. economy, repeatedly using phrases such as solid, strong and resilient.
‘The overall economy is strong,’ he said. Faster-than-expected growth in the second half of 2024; There is no reason to think a downturn is any more likely than usual; America has clearly avoided recession; Very optimistic about the economy.
Powell said policymakers generally expect GDP growth to remain strong.
Talk about inflation and the job market
The Fed said it would continue to monitor progress in improving inflation in 2025, given that year-over-year inflation readings remain sticky.
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“In considering further rate cuts, we will watch for improvements in inflation,” Powell said. “We have made little discernable progress on the 12-month inflation data.”
Powell argued that consumers are feeling the effects of high prices more than the direct effect of high inflation.
“We are very aware that prices have gone up a lot and people are really feeling it, including food, transportation and heating bills. This global outbreak of inflation is causing great pain, “he said. “Even though inflation has come down a lot, people are still feeling the pressure of high prices, and that’s what consumers feel most immediately.”
The best solution for this, he added, is for the Fed to continue its efforts to bring inflation down to its target so that wages can keep up with inflation and eventually restore consumers’ good feelings about the economy.
Powell said policymakers were closely watching developments in the labor market.
“On a number of indicators, we do think the labor market is cooling, but not at a rapid pace and not causing real concern,” he said.
Some officials have begun to assess the potential impact of Trump’s policies
Us President-elect Donald Trump has threatened to implement an aggressive tariff plan after taking office, which economists widely believe could lead to another rise in US inflation.
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Powell revealed that some members of the Federal Open Market Committee (FOMC) have begun preliminary assessments of the possible effects of Trump’s policies.
He also singled out Trump’s tariff plan, saying it was too early to draw conclusions about how it would affect inflation.
Powell said the Fed has no intention of holding Bitcoin
Trump has previously promised to implement policies favorable to the cryptocurrency industry after taking office and consider establishing a strategic reserve of bitcoin.
Powell said the Fed does not plan to add bitcoin to its balance sheet.
“We can’t hold Bitcoin. The Federal Reserve Act sets out what we can have, and we have no intention of seeking to change the law. That’s something for Congress to consider, but we’re not looking for change at the Fed, “Powell said.
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