Federal Reserve Chairman Jerome Powell will be participating in a panel discussion titled “Monetary Policy Challenges in a Global Economy” today. The panel is part of the 24th Annual Jacques Polak Annual Research Conference hosted by the International Monetary Fund. The discussion will commence at 2 p.m. Eastern and will feature renowned experts including Gita Gopinath from the IMF, Amir Yaron, the Governor of the Bank of Israel, and Kenneth Rogoff, the chair of international Economics at Harvard University.
Given the current economic landscape characterized by softening momentum, tighter financial conditions, and persisting inflation concerns, every word from Powell carries significant market implications. Market participants eagerly await any insight into the Federal Reserve’s upcoming decisions.
EY Chief Economist Gregory Daco highlights the dilemma surrounding the Fed’s next move in these uncertain times.
Fed’s Policy Playbook in Need of Revision
“We continue to believe the Fed’s policy playbook needs a revision, especially in an erratic economic, financial, and geopolitical climate,” asserts a commentator. According to them, the current approach of navigating without clear direction and relying solely on outdated information is precarious. They emphasize the urgency for policymakers to recalibrate and adopt a more forward-looking policy framework.
Uncertainty Surrounding Future Rate Cuts
Following Federal Reserve Chairman Powell’s recent press conference, many observers believe that the Fed’s tightening cycle has reached its conclusion. The CME FedWatch Tool, which monitors interest-rate futures, currently places the odds of rates being held steady next month at 90.5%.
The pressing question on everyone’s mind is when the rate cuts will begin. Differing opinions exist on this matter. EY’s Daco predicts that the Fed will not cut interest rates before the middle of next year, with potentially gradual cuts commencing in June. These cuts are expected to amount to 75 basis points (equivalent to one percentage point).
Economic Data Drops to Influence U.S. Economy
As we enter a new week, the focus shifts towards the upcoming economic data drops, which have the potential to shape attitudes regarding the U.S. economic situation. Last week’s jobs report was underwhelming; however, this week brings anticipated updates on inflation through the Consumer Price Index, as well as October retail sales figures. These pieces of data will provide valuable insights into the state of the U.S. economy.