Fed Chair Powell Rules Out a Hike after Maintaining Rates at 5.5%

Federal Reserve Chair Jerome Powell has indicated that the central bank’s upcoming move is unlikely to involve a rate hike. This statement led to a surge in the three major stock indexes, with the Dow rising over 500 points at its peak during the trading session. Following their May meeting, Federal Reserve policymakers maintained interest rates within the range of 5.25% to 5.5%.

Concerns arose after last week’s GDP report revealed a slowdown in overall growth coupled with steady price increases, sparking fears of potential “stagflation” in the U.S. However, Powell dismissed this notion on Wednesday, stating, “I don’t really understand where that’s coming from.” He emphasized that economic growth sits around 3% and inflation remains below 3%, refuting claims of stagflation.

Powell reiterated that a rate hike at the June meeting is off the table unless there is compelling evidence showing that current policies are not adequately curbing inflation towards the 2% target. The Federal Reserve is looking for increased confidence in inflation decreasing towards 2%, a goal that has not been met yet, according to Powell.

Highlighting that the Fed will remain patient until inflation shows a significant shift, Powell underscored a need for a stronger data-backed assurance before considering any changes to the current federal funds rate target. Powell also emphasized the central bank’s vigilance towards the job market’s resilience in the midst of tightening monetary policies.