Federal Reserve Chairman Hints at No Interest Rate Hike?

Bittime - US Federal Reserve Chairman, Jerome Powell, revealed at a congressional hearing that high inflation is no longer the only risk facing the United States economy. Powell highlighted that the Federal Reserve is now facing the challenges of high inflation, a slowing labor market and slowing economic growth.

Federal Reserve: Progress in Fighting Inflation

Powell emphasized that in the last 2 years, the Federal Reserve has made considerable progress in fighting inflation. However, despite this progress, the target of reducing inflation to 2% has still not been achieved. 

The latest inflation data suggests further progress, but the Federal Reserve still needs more data to confirm the continued downward trend in inflation.

No Interest Rate Increase?

In his statement, Powell said that he did notI expect an interest rate hike at the next Federal Reserve meeting scheduled for July 30-31. 

Furthermore, he added that the interest rate cut would come at the "right time as inflation declines. 

This statement fueled speculation that the Federal Reserve might cut interest rates at its monetary policy meeting in September.

Impact of High Interest Rates on the Economy

Powell also underscored that high interest rates are a double-edged sword. On the one hand, high interest rates can help suppress inflation, but on the other hand, they can have a negative impact on the economy if they are applied for too long or are too high.  

According to Powell, the labor market in the US is showing signs that are not good. This is an indicator that an economic slowdown is underway. Powell said that economic growth was also slowing, which further strengthens the reason not to raise interest rates in the near future.

Previously, on June 12, the Federal Reserve announced that it would maintain its target range for the federal funds interest rate at 5.25% to 5.5%. This is the seventh consecutive time since September 2023 that the Federal Reserve has maintained this interest rate range. 

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