According to Mr. Powell, the Federal Reserve no longer predicts a recession for the largest economy in the world this year. As a result, he suggests that there will be no interest rate cuts in 2023. He expresses confidence that inflation can be brought back to its target without a significant downturn that typically leads to high levels of job losses seen in the past. The chairman reaffirms the Fed’s commitment to reducing inflation to its 2% goal, and future decisions will be made on a meeting-by-meeting basis.
In June, rate setters paused after a year of consecutive hikes due to uncertainties about the economic outlook. However, Mr. Powell states that there is a possibility of raising funds again at the September meeting if the data supports it, but it is also possible to choose to maintain the current interest rates.
The Dow Jones Industrial Average is expected to achieve its longest winning streak since January 1987, indicating reduced concerns about a recession. Additionally, the S&P 500 has increased following Mr. Powell’s remarks.
The Federal Reserve’s actions now shift the focus to the Bank of England, which has faced criticism for its inability to control inflation. In the US, prices rose by 3% in the year leading up to June, the slowest rate in two years and a significant drop from the previous peak of over 9%. In contrast, the UK experienced an inflation rate of 7.9% during the same period, posing a challenge for the Bank of England in its efforts to manage price increases.
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