Powell Signals Economic Stability Amid Controlled Inflation and Potential Rate Cuts

Fed Chair Jerome Powell indicated a steady decline in inflation may pave the way for interest rate cuts, though the timing remains flexible. Addressing the National Association for Business Economics, Powell suggested two potential cuts this year, while market reactions showed mixed sentiments based on his comments.

Fed Chair Jerome Powell indicated that a steady decline in inflation would likely allow for the Federal Reserve to lower interest rates gradually. Speaking at the National Association for Business Economics conference in Nashville, Tennessee, he emphasized that decisions would be made on a meeting-by-meeting basis, reiterating the balanced risks involved. Powell projected two more rate cuts this year, totaling 50 basis points, depending on economic performance.

Market reactions were mixed following Powell's remarks. The S&P 500 experienced a slight dip, and bond yields saw a marginal rise. Analysts noted a retracement in market enthusiasm for rapid rate cuts, highlighting a disconnect between the bond and equity markets.

Experts like Wasif Latif of Sarmaya Partners and Robert Phipps of Per Stirling Capital Management interpreted Powell's comments as less dovish than expected, suggesting a cautious approach rather than imminent aggressive cuts. Despite this, economic indicators reveal consumer spending resiliency, with revised savings rates boosting confidence in economic stability.

(With inputs from agencies.)