Powell expects lower future interest rates, and cautions against Pre-Pandemic lows

Powell on interest rate: Federal Reserve Chair Jerome Powell shared insights indicating his expectation of a downward trajectory for future interest rates during an interview at the Federal Reserve Bank of San Francisco. However, Powell tempered expectations by suggesting that interest rates are unlikely to be around the exceedingly low levels observed before the COVID-19 pandemic.

Despite the current elevated interest rate environment, Powell maintained an optimistic outlook regarding the economy, suggesting that it has yet to suffer significantly from prevailing interest rate levels. This perspective highlights the Federal Reserve's careful navigation of monetary policy amid evolving economic dynamics.

In its recent March policy meeting, the U.S. Federal Reserve chose to uphold its current benchmark interest rate range, holding firm amidst a backdrop of mixed economic indicators. US Fed officials are eyeing the potential for three quarter-point interest rate cuts by year-end, contingent on clear evidence of inflation moving towards their 2 per cent target.

The latest figures from the Personal Consumption Expenditures (PCE) price index and the Consumer Price Index (CPI) illustrate a nuanced picture. While the PCE index rose modestly at a 2.5 per cent annual rate in February, core inflation edged slightly lower to 2.8 per cent. Conversely, the CPI showed a firmer uptick, reaching 3.2 per cent year-on-year in February, fueled by surging gasoline and shelter costs.

With Reuters Inputs