Bloomberg Talks Instant Reaction: Jay Powell on Fed Policy
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Dec 18, 2024 Jay Powell, Chairman of the Federal Reserve, discusses the recent policy decision to lower interest rates for the third time amid inflation concerns. He delves into the Fed's cautious outlook and highlights the delicate balance between economic data and market reactions. The conversation touches on how short-term data impacts future forecasts and explores the implications for financial stability in both the U.S. and emerging markets. Powell also addresses the challenges of navigating risk in a shifting financial landscape influenced by Fed policies.
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Fed Decision and Market Reaction
- The Federal Reserve cut interest rates by 25 basis points, but lowered expectations for future cuts.
- This led to a negative market reaction, with equities and bonds declining and the dollar strengthening.
Fed Forecasting Uncertainty
- Some Federal Reserve members factored potential policy effects into their forecasts.
- This caused uncertainty around inflation projections, reflecting diverse approaches within the committee.
Potential Collision Course
- Neil Dutta believes the Fed is on a collision course with the incoming administration by dialing back rate cuts while acknowledging cooling labor markets.
- He suggests the Fed's adjustments lower the bar for future action, potentially leading to further cuts early next year.