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Powell’s Caution: Extended Interest Rates Amid Persistent Inflation Concerns

Dollar Inflation

Powell told CNN at a Wilson Center panel that the FED is unlikely to drop interest rates soon, certainly not at the next meeting in two weeks, because inflation is not improving. This means rates will stay high for a while.

U.S. inflation jumped 3.5 percent between March 2023 and March 2024, according to Cryptopolitan. Most notably, Powell’s comments caused stock market swings, resulting in differing closing prices. Dow Jones Industrial Average rose 64 points, or 0.2%. The Nasdaq Composite lost 0.1% and the S&P 500 0.2%. Bond market participants saw the 2-year Treasury note yield exceed 5% yesterday before a little rebound brought it to around 4.96%.

According to Federal Reserve Chairman Powell, the latest numbers do not indicate that inflation is approaching the central bank’s 2% goal. Given the strong labor market and impending inflation success, it is wise to give the restrictive policy more time to work and let the data and shifting outlook guide us, he said.

Interest rates are at their highest in 23 years thanks to the Federal Reserve’s aggressive rate hikes two years ago. Inflation dropped substantially in the last summer of 2022 from its peak forty years ago, but the newest data shows that price pressure persists, notably in the housing and service industries.

Powell told CNN that the central bank will likely keep interest rates high at its next policy meeting in two weeks owing to inflation concerns. From March 2023 to March 2024, Cryptopolitan recorded 3.5% U.S. inflation. Powell told CNN that the central bank will not be able to decrease interest rates at the two-week policy meeting due to inflation difficulties, signaling that rates will remain high for a long time.

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Powell Signals Prolonged High Interest Rates Amid Lingering Inflation Concerns

Following Powell’s remarks, the market was volatile and left the day with a mixed result. The Dow Jones Industrial Average increased by 64 points to reach 0.2%. Nevertheless, the S&P 50 lost 0.2% and the Nasdaq Composite lost 0.1%. On Tuesday, the 2-year bond rate crossed above 5% only to recede to 4.96%.

Federal Reserve Chairman Powell said, “The recent data have clearly not given us greater confidence that inflation is headed toward the 2% target.” He continued, “Right now, given the strength of the labor market and progress on inflation so far, it’s appropriate to allow restrictive policy further time to work and let the data and evolving outlook guide us.”

Interest rates are at their highest in 23 years after two years of Federal Reserve hikes. Although it reached a 40-year low in summer 2022, the current inflation figures show persistent pricing pressure, particularly in services and housing.

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