Jerome Powell has tantalized the financial world with the prospect that the Federal Reserve he leads may soon cut interest rates for the first time in over a decade.
Probably not quite yet, though.
The Associated Press reported that when the Fed issues a policy statement Wednesday and Powell holds a news conference, the message will likely echo the theme the chairman struck in a speech early this month: That the Fed will act if it thinks the Trump administration’s trade conflicts are threatening the U.S. economy.
Powell’s remarks were seen as a signal that the Fed will likely cut rates later this year, and the stock market surged in response.
Yet economists say when — or even whether — the Fed eases credit this year will depend on a host of factors that are hard to predict. Will Trump’s trade wars be resolved before they inflict real damage on the economy? Will the job market remain resilient? Will inflation finally edge close to the Fed’s target level?
Investors collectively envision a Fed rate cut by July and possibly further cuts after that. Some are even betting on a rate cut this week. Many economists, though, think the Fed will wait until September at the earliest to announce its first drop in its benchmark short-term interest rate since 2008 and might not cut again in 2019. A few Fed watchers foresee no rate cut at all this year.
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