cryptopolitan.com
Jerome Powell, the Chair of the Federal Reserve, has decided to switch things up when it comes to cutting interest rates.
Speaking at the Economic Club of Washington D.C., Powell made it clear that the central bank will not wait for inflation to hit the 2% mark before lowering rates.
Powell explained the reasoning behind this shift, pointing out that central bank policies take time to have an effect. He said:
“If you wait until inflation gets all the way down to 2%, you’ve probably waited too long because the tightening that you’re doing is still having effects which will probably drive inflation below 2%.”
Instead, the Fed is looking for more assurance that inflation is on its way to the 2% target. Powell stressed that recent positive inflation data has been encouraging.
“What increases that confidence is more good inflation data, and lately here we have been getting some of that,” he mentioned.
When it comes to the economy, Powell expressed that a “hard landing” isn’t likely. His comments followed the release of the consumer price index report for June, which showed cooling inflation with prices dropping month over month.
But Powell also said he wasn’t hinting at any immediate rate cuts. The Fed’s next policy meeting is at the end of July, which will provide more clarity.
Currently, the federal funds rate is set between 5.25% and 5.50%, a significant rise from the near-zero rates during he COVID and the 1.50% to 1.75% range before that.
Powell lightened the mood with a joke, saying, “People I don’t know will always say, ‘hey, cut rates.’ Somebody said that in the elevator this morning.”
Meanwhile, the softer CPI numbers triggered a rally in crypto markets, further supported by the failed assassination on Donald Trump. At press time, Bitcoin had surpassed $64,000 with after surging past $60,000 barely 48 hours ago.