We had to wait until the end of his press conference on Wednesday, January 31, for Federal Reserve (Fed) Chairman Jerome Powell to drop his bombshell: “I don’t think the committee is likely to reach that level of confidence (enough) By March meeting (To start reducing rates) But that remains to be seen.” Suddenly, Wall Street tanked, while interest rates tightened.
Operators who had hoped that the American central bank would cut its rates at the end of its next monetary policy committee meeting on March 20 will have to wait until the next meeting, probably on March 1.er can In its press release, the organization had already hinted that the drop would not happen immediately, but less clearly: “The Monetary Policy Committee does not believe that it would be appropriate to reduce it (rate) Unless he gains more confidence in the fact that inflation is steadily moving towards 2%. »
At its December meeting, most Fed members predicted they would cut rates three times in 2024 after tightening credit three times.
Mission almost complete
From March 2022 to the summer of 2023, the Fed suddenly raised its rates from 0 to 5.25% to curb inflation, borne out of the disruptions created by the Covid crisis, accentuated by the war in Ukraine and facilitated by ultra-accommodative monetary and fiscal stimulus. Monetary policy. The brutality of fiscal tightening to avoid inflation-wage spirals and high expectations of price hikes.
Two years later, with annual inflation falling to 2.9% in December 2023, the mission is almost complete. This performance was achieved almost miraculously, with unemployment at its lowest point of 3.7% and growth solid (2.5% in 2023).
But Mr. Powell wants to make sure he does not ease the reins too soon to avoid a resurgence of the inflation the United States experienced in the 1970s and 1980s.
Wall Street, which opened lower due to weak results from Microsoft and Google, ended the session down 1.61% for the S&P 500 index and 2.23% for the Nasdaq, which brings together major technology stocks. At 3.95%, ten-year rates remain low, compared with more than 5% in October 2023.
