Cnbc – The Federal Reserve surprised Wall Street with a half-point rate cut on Wednesday, bringing its target range to 4.75% to 5%. The decision was not unanimous, as Fed Governor Michelle Bowman called for a quarter-point cut instead.
At his press conference, Chair Jerome Powell called the rate reduction a “recalibration” of central bank policy, noting that the Fed will continue to make decisions meeting by meeting.
Fed Chair Powell doesn’t see the risk of an economic downturn being “elevated” following the super-sized cut.
“I don’t see anything in the economy right now that suggests that the likelihood of a recession, sorry, of a downturn is elevated,” he said.
“I don’t see that,” he continued. “You see growth at a solid rate. You see inflation coming down. You see a labor market that’s still at very solid levels. So, I don’t really see that now.”
— Sean Conlon
Federal Reserve Chair Jerome Powell does not expect the era of cheap money to return.
“Intuitively, most — many, many people anyway — would say we are probably not going back to that era where there were trillions of dollars of sovereign bonds trading at negative rates, long-term bonds trading at negative rates,” he said.
“My own sense is that we are not going back to that,” Powell added.
He feels the neutral rate is likely significantly higher than it was back then, although he does not know yet how high it is.
— Michelle Fox
Note: The Federal Open Market Committee lowered the federal-funds rate target range to 4.75% to 5% on Wednesday—the first time central bank officials have adjusted rates since July 2023 and the first cut since the onset of the Covid-19 pandemic in March 2020.
