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Powell Reaffirms Rate Cut Outlook, Easing Concerns Amid Inflation Data

2 weeks ago

Federal Reserve Chair Jerome Powell reiterated the central bank’s intention to potentially lower interest rates this year, maintaining a cautious stance while assessing economic conditions. Powell emphasized that recent inflation figures had not significantly altered the overall economic landscape, providing a boost to risk assets. This affirmation suggests that concerns in markets about the economy’s strength potentially delaying rate cuts in June may have been overstated, with the current expectation remaining for rate cuts starting in June and totaling three throughout the year.

In light of signs of economic resilience and a more measured tone from various Fed officials in recent days, traders had tempered their expectations for rate cuts. This shift in sentiment raised doubts about the Fed’s ability to fulfill its projection of three rate reductions in 2024. The US dollar stabilized following its largest drop in nearly four weeks on Wednesday, prompted by easing price pressures in the US services sector.

Meanwhile, gold remained near a fresh record set on Wednesday, surging past $2,300 per ounce, supported by Powell’s indication of potential rate cuts this year. West Texas Intermediate crude oil extended its rally, marking its fifth consecutive session of gains and leaving the US benchmark price hovering around $85 per barrel.

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