Markets brace for federal reserve speech over rate cuts

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As markets navigate a shaky start to the second quarter, all eyes are on Federal Reserve Chair Jerome Powell’s upcoming speech, raising doubts about the central bank’s policy easing timeline.

Money market traders diverge from analysts on the timing and extent of interest rate cuts this year, with markets hesitant to fully price in a rate cut until July. Despite a roughly 65% chance of a cut in June, expectations for three cuts in 2024 have been tempered. However, with inflation persistent and economic data robust, the Fed may be gradually aligning with market sentiments.

Federal Reserve Bank of Cleveland President Loretta Mester emphasized the risk of initiating rate cuts too early, suggesting a cautious approach. While she wouldn’t dismiss a June cut if inflation data aligns with forecasts, Powell noted that recent inflation figures are in line with the Fed’s preferences. The market remains on edge as Powell’s speech looms, with uncertainty prevailing over the Fed’s stance on monetary policy.

Source: Reuters

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