Williams "I Expect a Rate Cut"
Barkin "Current Rates Are Restrictive"
Officials from the U.S. Federal Reserve (Fed) have repeatedly conveyed the message that the current interest rates are sufficiently restrictive. In the market, cautious expectations for a rate cut within the year are beginning to emerge.
On this day, John Williams, President of the New York Federal Reserve Bank, attended the 'Milken Global Conference 2024' held at the Beverly Hilton Hotel in Los Angeles (LA), USA, and said, "The current monetary policy is in a very good position," adding, "I expect the benchmark interest rate to be cut."
He stated, "We are looking at all the data," and "We have time to gather more data," indicating that future monetary policy decisions will be based on incoming indicators. This message aligns with Fed Chair Jerome Powell’s remarks on the 1st, when he dismissed the possibility of a rate hike. However, President Williams did not specify the exact timing of the rate cut.
Thomas Barkin, President of the Richmond Federal Reserve Bank, also expressed at the Rotary Club in Columbia, South Carolina, that the current interest rates are sufficiently restrictive to ease inflation.
He said, "I am optimistic that the current restrictive rate levels will suppress demand and bring inflation back to target levels." He added, "I do not see the economy overheating, but the Fed knows how to respond if it does," emphasizing, "If the economy slows down more significantly, the Fed has enough firepower to support it as needed."
The remarks from these two Fed officials align with Chair Powell’s earlier statements. At a press conference immediately following the release of the Federal Open Market Committee (FOMC) policy statement on the 1st, Powell said, "It will take longer than expected to be confident that inflation is on a sustainable path toward 2%," but also stated, "The likelihood of the next policy rate move being an increase is low. I want to say it is very unlikely." While he anticipated more time would be needed to confirm further inflation slowdown, he clearly drew a line against market concerns about a rate hike.
Sam Stovall, Chief Investment Strategist at CFRA, said, "Many investors breathed a sigh of relief," adding, "It seems the market is saying the bear market is over. We like to see some form of continuation."
As market expectations for a rate cut revived, the three major indices on the New York Stock Exchange all closed higher that day. The Dow Jones Industrial Average, focused on blue-chip stocks, closed at 38,852.27, up 176.59 points (0.46%) from the previous trading day. The S&P 500, centered on large-cap stocks, rose 52.95 points (1.03%) to 5,180.74, and the Nasdaq, focused on technology stocks, gained 192.92 points (1.19%) to close at 16,349.25.
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