Central Bank Governor Jerome Powell said Tuesday evening Norwegian time that it will take “longer than previously expected” to bring inflation down to the central bank's 2 percent target, suggesting the next interest rate cut will come later than the market rate. Earlier this year.
“Given the strength of the labor market and the progress in inflation to date, it is appropriate to give restrictive policy more time to work and let data and developments in expectations guide us,” Powell said during an event in Washington on Tuesday. .
With these comments, Powell acknowledges for the first time that the strong inflation numbers from the first quarter of this year do not show the progress the central bank needs to start cutting interest rates.
That was a change from comments made just two weeks ago, when Powell stressed that the overall outlook had not changed much, even though the numbers were higher than expected at the start of the year.
Inflation measurements
Powell indicated that he believed the Fed's preferred indicator of inflation — an index of personal consumption expenditures excluding volatile food and gasoline prices — would not change much in March compared to February, when it was 2.8 percent.
Powell's comments come after markets suffered a minor setback last week after the CPI showed higher-than-expected inflation for the third month in a row.
In March, the Consumer Price Index rose 3.5 percent from a year earlier, an increase from February's 3.2 percent annual price increase, and more than economists had expected.
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