Federal Reserve Chair Jerome Powell struck a cautious tone in his latest remarks, signaling that the central bank will take a patient approach to interest rate cuts despite growing calls from markets for monetary easing.
Inflation Remains Above Target
Speaking at a press conference following the Fed's latest policy meeting, Powell acknowledged that inflation has made significant progress from its 2022 peaks but remains above the 2% target the Fed considers optimal for the economy.
"We need to see more evidence that inflation is moving sustainably toward our 2% objective before we begin to reduce the federal funds rate," Powell said.
Labor Market Resilience
The chairman pointed to the continued strength of the labor market as a factor supporting the Fed's patient stance. Job creation has remained robust, and the unemployment rate continues to hover near historic lows.
Market Reaction
Treasury yields moved higher following Powell's remarks, with the 10-year yield climbing to 4.52%. Stock markets initially dipped but recovered as investors digested the commentary, with the S&P 500 closing flat on the session.
Fed funds futures now price in just two rate cuts for the remainder of the year, down from three cuts expected a month ago.
