US Federal Reserve said interest rates are likely to be cut this year

Chairman of the United States Federal Reserve, jerome powellThe Fed said this Wednesday that interest rates are likely to be cut “at some point” after inflation hit a 22-year high.

“We think our policy rate is likely to be at its peak during this tightening cycle. If the economy generally develops as expected, it would probably be appropriate to initiate monetary policy changes sometime this year,” he assured the House Financial Services Committee.

“But the economic outlook is uncertain and progress toward our 2% inflation target is not guaranteed,” Powell stressed.

Additionally, he argued that cutting rates too deeply or too quickly “could reverse the progress we have seen on inflation and would ultimately require even tighter policy to get inflation back to 2%.”

“We remain committed to reducing inflation to our 2% target and keeping long-term inflation expectations well within expectations. “Restoring price stability is essential to laying the foundation for achieving maximum employment and stable prices over the long term,” Powell highlighted.

The FED official’s comments come two weeks before the next monetary policy meeting, where officials are expected to keep rates steady for the fifth consecutive time.

Reference rates are an important piece of information for stocks and other financial assets. If rates affect the value of money, a weak dollar increases stock market valuations. Conversely, expectations of higher rates over a longer period of time tend to weaken these quotes.

It should be remembered that the FED last raised rates in July 2023 from 5.25% to 5.5%, which was a 22-year high.

It should be mentioned that inflation developed in opposite directions in January The United States, according to the US central bank’s preferred PCE index, is falling in a year but rising in a month.

As expected, consumer price growth slowed to 2.4% year-on-year in January, compared with 2.6% in December. But in a month it increased to 0.3% compared to the previous 0.1%.

Inflation in the United States declined steadily after reaching a peak last year 9.1% in June 2022, Starting in March that year, the Federal Reserve increased its reference rate 11 times to attack the worst inflation in 40 years.

Judging by Powell’s statements, gold reached a historical record on Wednesday: it reached US$2,148.99 an ounce at the beginning of the wheel. Gold got additional boost from the fall in the dollar.

The dollar index, which measures the currency’s strength against six currencies, fell 0.30% to 103.47 units. In mid-February, driven by solid economic data from the United States, the index reached 104.97 points, showing an annual increase of 3.6%.

In other precious metals, platinum rose 2.4% to $901.85 an ounce, while palladium rose more than 10% to $1,042.83.

According to data compiled by CME Group, traders see a 70% chance that the FED will cut rates in June.