On December 4, 2024, Federal Reserve Chair Jerome Powell spoke at the New York Times DealBook Summit. He shared his thoughts on the economy and the Fed’s plans. Here are the main points:
Fed’s Independence
Fed chair Powell stressed that the Fed needs to set interest rates without political pressure. This independence helps the Fed make decisions that benefit everyone, not just a political party. He believes Congress supports keeping the Fed independent, despite President-elect Donald Trump’s criticisms.
Interest Rates and Economy
Powell said the economy is stronger now than when the Fed started cutting interest rates in September. This means the Fed can be more careful with further rate cuts. The goal is to reduce inflation to 2% without causing a recession. Although the job market has slowed and inflation has dropped, it is still slightly above the target, which might make the Fed cautious about cutting rates too much.
Other Fed Officials’ Views
Some Fed officials, like Christopher Waller and Mary Daly, support more rate cuts but haven’t set specific dates. Waller is leaning towards a rate cut at the next meeting, while Daly emphasizes the need for policy adjustments to support economic growth with low inflation.
US Federal Budget and Policies
Powell mentioned that the US federal budget is on an unsustainable path and needs changes soon. He dismissed Bitcoin as a competitor to the dollar and stressed the importance of making policy decisions based on current economic conditions, not uncertain factors like potential tariffs.
Upcoming Fed Meeting
The next Fed policy meeting is on December 17 and 18, where they will decide on interest rates.
Powell’s talk reassured that the Fed is taking a careful approach to monetary policy to maintain economic stability.
Impacts on The Stock Market
The stock market responded positively, with the S&P 500 index moving higher and reaching new all-time highs. Powell’s cautious yet optimistic tone about the economy and interest rates reassured traders, boosting market confidence. He highlighted that the Fed could afford to move more slowly in cutting interest rates due to the current economic strength. This helped remove concerns about aggressive rate cuts and their potential impact on the market. Powell’s commitment to achieving a “soft landing” for the economy, aiming to reduce inflation to the 2% target without causing a recession, further increased traders’ optimism. As a result, the S&P 500 rose, reflecting the positive sentiment and confidence in the Fed’s approach to monetary policy.
