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Fed Chair Expects Rate Cuts and Bank Rule Overhaul
March 6, 2024
Federal Reserve Chair Jerome Powell delivered a detailed testimony to House lawmakers on Wednesday, indicating the potential for interest rate cuts in 2024. He expressed openness to significant changes in a controversial banking regulation proposal.
During Powell’s extensive three-hour testimony, he delved into a range of topics spanning immigration, commercial real estate, and housing. However, the crux of his address centered on monetary policy and bank regulation.
He underscored the possibility of rate cuts later in the year, despite lingering concerns about inflation, while also stressing the necessity of gathering more data before reaching decisions.
In reference to the proposed bank rule, Powell emphasized the imperative for substantial revisions to yield better outcomes, hinting at the potential for starting anew with a fresh proposal if deemed necessary.
Lawmakers, notably House Financial Services Chair Patrick McHenry, voiced apprehensions regarding the bank capital rules, to which Powell acknowledged the considerable feedback garnered on the proposal.
Democratic ranking member Maxine Waters spotlighted housing as a significant contributor to inflation, a point Powell conceded, though he underscored it as just one of the many factors influencing inflation.
Powell also tackled other economic matters like immigration, bank failures, the impact of AI, and challenges in commercial real estate. While he deemed commercial real estate manageable, he anticipated some losses.
His testimony preceded the central bank’s imminent policy meeting, where rates are forecast to hold steady. Despite previous expectations for rate cuts, recent economic data has prompted a more cautious approach.
With inflation readings surpassing expectations, the Fed has postponed potential rate cuts. Powell reiterated the uncertainty in the economic forecast, highlighting the delicate balance between curbing inflation and bolstering economic growth.
Investors are recalibrating their expectations, anticipating rate cuts later in the year. However, uncertainties persist, and the Fed’s course of action will hinge on forthcoming economic developments.
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