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Powell says Fed won’t rush to cut interest rates until inflation is conquered
Investors are watching for any clarity about the timing of interest-rate cuts this year.
Federal Reserve Chair Jerome Powell said Wednesday that policymakers expect to cut interest rates sometime in 2024, but are not ready to do so until they are confident inflation is tamed.
In remarks prepared for testimony before the House Financial Services Commitee, Powell said Fed officials are trying to balance the risks between cutting interest rates too soon, which risks setting off inflation again, or waiting too long to cut rates, which could weigh on the economy and possibly trigger a recession.
“We believe that our policy rate is likely at its peak for this tightening cycle,” he said. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured.”
The Fed chief is on Capitol Hill for the first of two days of his semi-annual monetary policy testimony. He is slated to appear before the Senate Banking Committee on Thursday.
FED HOLDS INTEREST RATES STEADY, SIGNALS IT IS NOT READY TO START REDUCING RATES
Jerome Powell, chairman of the Federal Reserve, speaks during a news conference following a Federal Open Market Committee meeting in Washington, D.C., on March 22, 2023. (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)
The Federal Open Market Committee voted during their January meeting to hold rates steady at a range of 5.25% to 5.5%, the highest level in 22 years. Although policymakers also cracked open the door to reducing rates this year, Powell told reporters during the post-meeting press conference that a March cut was unlikely.
Most investors now expect the Fed to begin rate cuts in June and are betting the central bank will reduce borrowing costs between three to four times over the course of the year.
While inflation has cooled considerably in recent months, it remains up 3.1% compared to the same time a year ago, according to the most recent Labor Department data.
FED’S FIGHT AGAINST INFLATION IS WEIGHING ON MIDDLE-CLASS AMERICANS
Policymakers have raised interest rates sharply over the past two years, approving 11 rate increases in the hopes of crushing inflation and cooling the economy. In the span of just 16 months, interest rates surged from near zero to above 5%, the fastest pace of tightening since the 1980s.
Hiking interest rates tends to create higher rates on consumer and business loans, which then slows the economy by forcing employers to cut back on spending. Higher rates have helped push the average rate on 30-year mortgages above 8% for the first time in decades. Borrowing costs for everything from home equity lines of credit, auto loans and credit cards have also spiked.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 38755.09 | +169.90 | +0.44% |
| I:COMP | NASDAQ COMPOSITE INDEX | 16002.937085 | +63.35 | +0.40% |
| SP500 | S&P 500 | 5102.69 | +24.04 | +0.47% |
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Yet the rapid rise in rates has not stopped consumers from spending or businesses from hiring.
The labor market is continuing to chug along at a healthy pace, with employers adding 353,000 new workers in January – nearly double what economists expected. Job openings remain high, and the unemployment rate is continuing to hover around 3.7%.
Fed officials have said that higher interest rates are still working their way through the economy and will eventually weigh on growth. Until that happens, policymakers have indicated they will keep interest rates elevated.
This is a developing story. Please check back for updates.
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As we look ahead to 2024, many homeowners and prospective buyers are wondering what to expect when it comes to mortgage rates. The landscape of the housing market is constantly changing, so it’s important to stay informed about trends and predictions. In this blog post, we will discuss some factors that could impact mortgage rates in 2024 and what homeowners and buyers can expect.
One factor that could impact mortgage rates in 2024 is the overall state of the economy. If the economy is strong and growing, we may see higher mortgage rates as the Federal Reserve looks to combat inflation. On the other hand, if the economy is stagnant or in a recession, we may see lower mortgage rates as the Fed looks to stimulate growth. It’s important to keep an eye on economic indicators such as GDP growth, unemployment rates, and inflation to get a sense of where mortgage rates may be heading.
Another factor that could impact mortgage rates in 2024 is Federal Reserve policy. The Fed plays a key role in setting interest rates, and their decisions can have a ripple effect on mortgage rates. If the Fed decides to raise interest rates in response to inflation, we may see an increase in mortgage rates. Conversely, if the Fed decides to lower interest rates to stimulate growth, we may see a decrease in mortgage rates. Keeping up with the latest news and announcements from the Fed can give homeowners and buyers a sense of where mortgage rates may be heading.
In terms of specific cities and local mortgage companies, it’s important to note that mortgage rates can vary depending on location and lender. For example, in a city like New York City, where real estate prices are high, mortgage rates may be higher compared to a city like Indianapolis, where real estate prices are lower. Additionally, local mortgage companies may offer competitive rates and terms compared to national lenders. For example, in New York City, local lenders like Quontic Bank and CrossCountry Mortgage may offer specialized products and services tailored to the needs of local buyers.
It’s important for homeowners and buyers to shop around and compare rates from multiple lenders to ensure they are getting the best deal. Websites like Bankrate and LendingTree can be helpful resources for comparing rates and terms from multiple lenders. Homeowners and buyers should also consider working with a mortgage broker who can help them navigate the lending process and find the best mortgage product for their needs.
In conclusion, predicting mortgage rates in 2024 is not an exact science, but there are several factors that could impact rates. By staying informed about economic indicators, Federal Reserve policy, and local market trends, homeowners and buyers can make informed decisions about their mortgage. Shopping around and comparing rates from multiple lenders is key to ensuring you are getting the best deal on your mortgage. Whether you’re looking to refinance your existing mortgage or buy a new home, it’s important to stay informed and be proactive in managing your mortgage.
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