Fed recap: Chair Powell explains why the central bank isn’t ready yet to cut rates

The
Federal
Reserve’s
restrictive
stance
on
monetary
policy
is
having
the
effect
on
inflation
central
bankers
had
hoped
to
see,
Fed
Chair
Jerome
Powell
said
Wednesday
afternoon.
But
central
bankers
are
still
waiting
to
see
sufficient
progress,
he
added.

“The
question
of
whether
it’s
sufficiently
restrictive
is
going
to
be
one
we
know
over
time,”
Powell
said.
“But
I
think
for
the
reasons
I
talked
about
at
the
last
press
conference
and
other
places,
I
think
the
evidence
is
pretty
clear
that
policy
is
restrictive
and
is
having,
you
know,
the
effects
that
we
would
hope
for.”

—
Sean
Conlon

Federal
Reserve
Chair
Jerome
Powell
said
it
is
unclear
why
the
sentiment
of
everyday
Americans
is

so
sour
on
the
economy.

“I
don’t
think
anyone
…
has
a
definitive
answer
why
people
are
not
as
happy
about
the
economy
as
they
might
be,”
he
said.

However,
he
did
say
there
is
a
growing
economy
and
strong
labor
market.
While
inflation
ran
high,
he
noted
that
the
pace
of
price
increases
has
come
down
“significantly.”

—
Alex
Harring

Federal
Reserve
Chair
Jerome
Powell
said
no
one
on
the
committee
has
interest
rate
hikes
in
their
base
case.

“We
think
policy
is
restrictive.
And
we
think,
ultimately,
that
if
you
just
set
policy
at
a
restrictive
level,
eventually
you
will
see
real
weakening
in
the
economy,”
he
said.
“So,
that’s
always
been
the
thought
is
that,
you
know,
since
we
raised
rates
this
far,
we’ve
always
been
pointing
to
cuts
at
a
certain
point.”

“Not
to
eliminate
the
possibility
of
hikes,
but
no
one
has
that
as
their
base
case,”
Powell
said.
“No
one
on
the
committee
does.”

—
Sarah
Min

Federal
Reserve
Chair
Jerome
Powell
said
the
recent
strong
jobs
data
might
be
slightly
“overstated,”
indicating
that
benchmark
revisions
could
be
on
the
way.

“…
There’s
an
argument
that
they
may
be
a
bit
overstated,
but
still,
they’re
strong,”
Powell
said,
referring
to
U.S.
payroll
reports.
“We
see
gradual
cooling,
gradual
moving
toward
better
balance.”

Nonfarm
payrolls
expanded
by
272,000
for
the
month
of
May,
up
from
165,000
in
April
and
well
ahead
of
the
Dow
Jones
consensus
estimate
for
190,000.

—
Yun
Li

Federal
Reserve
Chair
Jerome
Powell
said
the
central
bank
does
not
yet
have
the
confidence
to
start
lowering
interest
rates,
even
after
May’s
consumer
price
index
on
Wednesday
came
in
cooler
than
expected.

“We
see
today’s
report
as
progress
and
as,
you
know,
building
confidence,”
Powell
said.
“But
we
don’t
see
ourselves
as
having
the
confidence
that
would
warrant
beginning
to
loosen
policy
at
this
time.”

—
Sarah
Min

Powell
said
Fed
members
were
given
the
chance
to
update
their
answers
for
the
Summary
of
Economic
Projections
in
light
of
this
morning’s
consumer
price
index
report.

“We
make
sure
people
remember
that
they
have
the
ability
to
update.
We
tell
them
to
do
that.
…
What’s
in
the
SEP
actually
does
reflect
the
data
that
we
got
today,
to
the
extent
you
can
reflect
it
in
one
day,”
Powell
said.

—
Jesse
Pound

Inflation
data
this
year
has
not
yet
given
the
Federal
Reserve
“greater
confidence”
that
it
is
moving
closer
to
the
2%
goal,
according
to
Fed
Chair
Jerome
Powell.

“We’ll
need
to
see
more
good
data
to
bolster
our
confidence
that
inflation
is
moving
sustainably
toward
2%,”
he
said.

In
the
Fed
statement,
central
bank
leaders
acknowledged
that
there
has
been

“modest”
further
progress
on
getting
price
growth
down
to
2%.
Before,
the
Fed
had
said
there
was
a
“lack
of”
recent
progress.

—
Alex
Harring

The
most
recent
string
of
inflation
readings
is
showing
sign
of
cooling
price
pressures,
according
to
Federal
Reserve
Chair
Jerome
Powell.

“The
inflation
data
received
earlier
this
year
were
higher
than
expected,
though
more
recent
monthly
readings
have
eased
somewhat,”
Powell
said
Wednesday.
“Longer-term
inflation
expectations
appear
well
anchored.”

—
Brian
Evans

Inflation
has
eased
substantially
from
its
peak
but
remains
too
high,
Federal
Reserve
Chair
Jerome
Powell
said
during
his
Wednesday
press
conference.

“Our
economy
has
made
considerable
progress
…
the
labor
market
has
come
into
better
balance
with
continued
strong
job
gains
and
a
low
unemployment
rate,”
he
said.
“Inflation
has
eased
substantially
from
a
peak
of
7%
to
2.7%,
but
is
still
too
high.
We
are
strongly
committed
to
returning
inflation
to
our
2%
goal
in
support
of
a
strong
economy
that
benefits
everyone.”

The
Fed
is
maintaining
its
restrictive
stance
on
monetary
policy,
Powell
added.

—
Pia
Singh

The
Federal
Reserve
will
likely
keep
interest
rates
elevated
as
it
seeks
sustainable
progress
toward
its
2%
inflation
target,
one
economist
said.

“There’s
no
denying
the
progress
toward
the
Fed’s
2%
target
but
the
real
debate
is
timeframe.
Barring
any
exogenous
shocks,
the
economy
will
slowly
converge
to
the
Fed’s
target,”
wrote
Jeffrey
J.
Roach,
chief
economist
at
LPL
Financial.

“Since
parts
of
the
economy
are
less
sensitive
to
interest
rates
in
this
business
cycle,
the
Fed
is
constrained
to
keep
rates
higher
for
longer,”
Roach
added.

—
Sarah
Min

Federal
Reserve
Chair
Jerome
Powell
began
his
news
conference
noting
the
U.S.
economy
has
made
progress
toward
both
of
the
central
bank’s
goals:
bringing
inflation
down
to
2%
and
maximizing
employment.

“Our
economy
has
made
considerable
progress
toward
both
goals
over
the
past
few
years,”
Powell
said.

“The
labor
market
has
come
into
better
balance,
with
continued
strong
job
gains
and
a
low
unemployment
rate.
Inflation
has
eased
substantially
from
[about]
7%
to
2.7%.
But
it’s
still
too
high,”
he
said.

—
Fred
Imbert

How
much
Wednesday’s
consumer
price
index
report
factored
into
the
Fed’s
projections
is
one
of
the
items
traders
will
be
looking
for
from
Chair
Jerome
Powell’s
press
conference,
according
to Seema Shah,
chief
global
strategist
at
Principal
Asset
Management.

“A
key
question
for
Powell
will
be,
did
the
FOMC
know
the
inflation
print
before
they
submitted
their
projections?
If
they
did,
that
maybe
implies
that
they
need
more
than
three
months
of
softer
inflation
prints
before
they
can
be
convinced
to
cut
rates,”
Shah
said
in
a
note.

—
Jesse
Pound

The
Federal
Reserve
kept
a
steady
hand
on
interest
rates,
but
it
is
calling
for
just
one
rate
cut
in
2024.

The
S&P
500
and
Nasdaq
Composite
held
on
to
their
gains
as
of
2:19
p.m.
ET,
with
the
broad
market
benchmark
up
1%
and
the
tech-heavy
index
up
nearly
1.8%.

The
Dow
Jones
Industrial
Average
added
about
32
points.

—

Darla
Mercado

In
the
Fed
statement
released
Wednesday,
central
bank
leaders
acknowledged
they
had
begun
seeing
“modest”
further
progress
toward
the
goal
of
2%
inflation.

Click
here
to
see
a
comparison
of
the
newest
and
previous
statements.

—
Alex
Harring

The
central
bank
kept
its
key
interest
rate
unchanged
at
a
range
of
5.25%
to
5.5%,
but
took
two
rate
cuts
off
the
table
for
this
year.

The
Federal
Open
Market
Committee
adjusted
its
rate
forecast
to
one
reduction
this
year,
down
from
three
in
March.

“In
recent
months,
there
has
been
modest
further
progress
toward
the
Committee’s
2
percent
inflation
objective,”
policymakers
said
in
their
statement.

Read
more
from
CNBC’s
Jeff
Cox
on
the
Fed’s
latest
statement
and

its
outlook
for
rates
here.

—

Darla
Mercado

The


S&P
500
and
the


Nasdaq
Composite
rose
on
Wednesday,
buoyed
by
May’s
cooler-than-anticipated
consumer
inflation
report.

At
about
1:50
p.m.
ET,
here
is
where
the
major
market
averages
stood.
The
S&P
500
added
about
1%,
while
the
Nasdaq
jumped
nearly
1.8%.
Both
indexes
touched
fresh
all-time
highs
in
the
session.

The


Dow
Jones
Industrial
Average
was
the
laggard,
rising
about
22
points.

Treasury
yields
declined,
with
the
rate
on
the


10-year
note
falling
more
than
13
basis
points
to
4.266%.
The
rate
on
the


2-year
note
slipped
nearly
14
basis
points
to
4.695%.
Bond
yields
move
inversely
to
their
prices.
One
basis
point
is
equal
to
one
one-hundredth
of
a
percent.

—

Darla
Mercado

May’s
consumer
price
index
reading
—
which
was
flat
on
a
monthly
basis
and
up
3.3%
from
a
year
earlier
—
boosts
hopes
for
rate
cuts
from
the
Federal
Reserve,
but
investors
should
keep
their
optimism
in
check,
warns
Seema
Shah,
chief
global
strategist
at
Principal
Asset
Management.

“Today’s
soft
inflation
print
eases
fears
that
labor
market
strength
may
drive
renewed
inflation
strength
and
likely
reinforces
Chair
[Jerome]
Powell’s
conviction
that
the
hot
inflation
data
of
Q1
was
just
a
bump
in
the
road,”
she
said.

“While
today’s
inflation
print
keeps
a
September
Fed
cut
firmly
in
the
picture,
it
does
not
reopen
the
door
to
a
July
cut,”
she
added.
“The
Fed
will
need
today’s
evidence
of
softer
price
pressures
to
be
also
corroborated
in
the
next
few
months’
inflation
prints
before
it
can
be
sufficiently
confident
to
ease.”

—

Darla
Mercado

The
Federal
Reserve’s
rate-hiking
campaign
has
had
a
notable
effect
on
consumers’
wallets,
boosting
the
yields
they
earn
on
savings
while
also
increasing
financing
costs.

CNBC’s
data
team
compared
where
rates
stood
prior
to
the
Fed’s
March
2022
meeting
—
where
it
began
raising
rates
in
this
latest
cycle
—
versus
last
week.

Consumers
are
shelling
out
more
to
cover
the
interest
costs
on
mortgages,
with
the
rate
on
the
30-year
fixed
loan
reaching
7.15%,
according
to
Mortgage
News
Daily.
That
is
compared
to
the
rate
of
4.29%
just
prior
to
the
Fed’s
initial
move
to
hike
rates.
Rates
on
credit
cards
have
also
jumped
more
than
400
basis
points,
sitting
at
20.68%
as
of
last
week,
up
from
16.34%
more
than
two
years
ago,
per
Bankrate.

When
it
comes
to
saving,
however,
consumers’
fortunes
have
improved.
The
annual
percentage
yield
on
a
six-month
certificate
of
deposit
is
now
at
3.406%,
up
from
0.22%
in
March
2022,
per
LendingTree.
The
higher
rates
have
also
been
a
boon
for
fixed-income
investors,
as
the
10-year
Treasury
yield
topped
4.4%
last
week,
compared
to
its
rate
of
just
over
2%
in
March
2022,
Refinitiv
found.

—

Darla
Mercado,
Nick
Wells

Traders
will
have
their
focus
on
the
Federal
Reserve’s
dot
plot
of

interest
rate
expectations
as
the
central
bank
concludes
its
policy
meeting.

The
dot
plot,
a
quarterly
report
of
where
policymakers
see
the
fed
funds
rate
heading,
is
closely
watched
by
traders.

Earlier,
the
Fed
had
indicated
three
rate
cuts
for
2024,
but
given
a
recent
blast
of
strong
jobs
reports
and
other
upbeat
economic
data,
many
are
expecting
the
forecast
to
show
two
reductions.

The
central
bank’s
updates
—
and
its
latest
rate
decision
—
are
coming
out
just
hours
after
May’s

consumer
price
index
reading.
On
a
monthly
basis,
the
headline
CPI
reading
held
steady
from
April,
but
it
rose
3.3%
from
a
year
earlier,
according
to
the
Bureau
of
Labor
Statistics.

—

Darla
Mercado,
Jeff
Cox