Traders and investors were eagerly waiting for the speech by Fed Chairman Jerome Powell at the Washington, DC Economic Club on Monday, where he discussed the performance of the US economy in recent years. Powell mentioned that the economy has been doing well, with some progress made in inflation in the second quarter. He also noted that while the economy was expected to slow down this year, the labor market has gradually become more balanced.
Powell emphasized that the Fed’s job is to make decisions based solely on data and not policy, and mentioned that they will not be sending signals regarding any meetings at this time. He also stated that if there is an unexpected weakening in the labor market, they will need to react accordingly. Additionally, Powell expressed that waiting for inflation to reach 2% before cutting interest rates would be waiting too long, as officials want to ensure that inflation is moving downwards.
The recent dovish turn in US monetary policy by the Fed has led to optimism among stock and financial market bulls, with expectations of a cut in US interest rates in the coming months. The Fed is set to meet on July 30-31, and while policymakers are not allowed to comment on monetary policy during this period, recent weak inflation reports could potentially lead to a policy change in September. Market participants will closely follow comments from policymakers to gauge their views on the latest data shaping monetary policy decisions.
Overall, Powell’s speech at the Economic Club highlighted the positive performance of the US economy in recent years, coupled with the gradual balance in the labor market. The market anticipates a dovish stance from the Fed in the upcoming months, with a possible interest rate cut in September. Investors will pay close attention to how the latest economic data shapes policymakers’ views, as they navigate through uncertainties in the global economy. *This article is not investment advice.
