Fed’s Jerome Powell Comments On Interest Rate Cuts Before Hitting Inflation Target

The week started with the Federal Reserve (Fed) head Jerome Powell delivering a speech in Washington in which he noted that the central bank wouldn’t have to hit its inflation target before reducing borrowing costs. Gold prices rose by 0.5% on Tuesday morning on the back of Powell’s remarks while the CME FedWatch Tool gives an 87.6% probability for a rate cut in September.

Powell Says Fed Could Cut Rates Before Hitting The 2% CPI Target

Speaking at the Economic Club of Washington, the Federal Reserve (Fed) head Jerome Powell said that the US central bank might not wait for inflation to come down to 2% which is its target before cutting its interest rates.

Powell mentioned that there is a lag regarding the effectiveness of the Fed’s policy, adding that “the implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%.”

New Zealand Q2 2024 CPI Report

Statistics New Zealand (Statistics NZ) will release the CPI inflation report on Wednesday morning. The economists’ consensus for the second quarter inflation in New Zealand is 0.5%, slightly lower than the previous quarter 0.6% figure. Annual inflation is expected to drop from 4.0% to 3.5% in the March quarter.

Inflation remains high, but there are some signs that it will start to drop in the near future according to the Reserve Bank of New Zealand (RBNZ) forecasts. In its last board meeting, policymakers at New Zealand’s central bank noted that “headline inflation is expected to return to within the 1 to 3 percent target range in the second half of this year. The committee is confident that inflation will return to within its 1-3 percent target range over the second half of 2024.”

UK CPI June 2024 Report

On Wednesday morning, the Office for National Statistics (ONS) is expected to publish its CPI inflation report for the month of June. Market analysts expect headline inflation to remain steady at 2% on an annualised basis while they anticipate a 0.1% figure on a month-to-month basis.

Last month, headline inflation returned to the Bank of England’s (BoE) target for the first time in the last three years. However, some analysts suggest that inflation will be between 2-2.5% in the next six months. Economists also noted that services inflation figures should be closely monitored as they remain elevated.

Canada CPI June 2024 Report

Later today, the Bank of Canada (BoC) and Statistics Canada will release their June CPI inflation reports. Economists expect CPI inflation to come in at 2.8%, marking a small drop when compared to the previous month. Market analysts suggest that these reports could determine the BoC’s monetary policy stance in its July meeting.

Despite the progress recorded when it comes to inflation, May’s figures were not in line with expectations as consumer prices surged. One more unexpected rise could push the BoC policymakers to refrain from lowering rates in their next meeting.

China GDP Growth Misses Expectations In Q2 2024

Data published by the Chinese National Bureau of Statistics (NBS) showed that the country’s economy expanded by 4.7%, on an annualised basis, in the second half of 2024. However, the figure was below what was anticipated as a Reuters poll among economists had forecast a 5.1% rate of growth.

The NBS accompanying report said that "generally stable with steady progress," accelerating the "growth of new driving forces and new achievements of the high-quality development. However, we should be aware that the external environment is intertwined and complex, the domestic effective demand remains insufficient and the foundation for sound economic recovery and growth still needs to be strengthened.”

Goldman Sachs cut their 2024 GDP forecast for China to 4.9%, down from 5.0% previously. JP Morgan lowered their estimate to 4.7% compared to 5.2% previously. JP Morgan’s analysts suggest that the Chinese economy remains "fragile, unstable and uneven".

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