U.S. Federal Reserve cuts interest rates for the first time in the year; Korean media cuts for the second time
While the U.S. Federal Reserve referred to the interest rate cut within the year as ‘the first rate cut within the year,’ Korean media reported it as ‘the second rate cut within the year.’
The ‘dot plot’ forecast released by the U.S. Federal Reserve on the 12th reflects policymakers’ concerns that inflation will continue to exceed comfortable levels, and the statement said, “Inflation has eased over the past year, but is still at a high level. “In recent months, progress towards the Committee’s 2% inflation target has been minimal,” it said.
The New York Times said, “Fed officials took a cautious approach to avoid declaring early victory over inflation, predicting they would leave interest rates unchanged at the June meeting and cut borrowing costs only once until the end of 2024.”13 It was reported.
‘Chosun Biz’ reported on the 14th, <New York stock market starts off mixed… Base rate cuts “possible twice” > The headline article said, “Market participants paid attention to the May Producer Price Index and the number of new weekly unemployment insurance claimants announced on this day. (omitted) Following the consumer price index, the producer price index also fell, confirming a signal that inflation is easing, and market expectations of an interest rate cut are growing,” the report said.
'Chosun Biz' continued, <James McCann, chief economist at the investment company Abrdn, said, "The opinions of many Federal Reserve officials regarding the number of interest rate cuts within the year were divided on one or two, but the slowdown in the consumer price index is very encouraging." “It would not be surprising at all if the stock market rises through two or more interest rate cuts this year,” he said.
Regarding the Fed's economic outlook, the NYT said, “Fed officials expect inflation to be stickier in 2024 than previously expected,” and “overall inflation ended the year at 2.6%, up from 2.4% in the previous estimate.” “It can be done, and Chairman Powell indicated that the Fed’s inflation forecast is ‘conservative,’” he said.
“Households are also suffering from months of unstable inflation data,” Fed Chairman Powell said in the meeting announcement. “The Fed’s goal is to curb runaway inflation,” he said. “A reading like today is a step in the right direction. But it’s just one reading. You don’t want to get too motivated by a single data point.” “He announced the possibility of one interest rate cut.
The NYT said, “Fed officials have made it clear that they want to see more encouraging inflation reports before cutting borrowing costs,” and added, “If the Fed cuts just once by the end of the year, the policy rate will be 5.1%. Policymakers have given no clear hints about when interest rate cuts will occur. “This year, four more meetings will be held in July, September, November, and December,” he said.
“I don’t think it is appropriate to begin to ease policy until we are confident that inflation is falling, or unless there is an unexpected deterioration in the labor market,” Powell said.
Regarding the Fed's July meeting, the NYT said, "For now, the economy remains resilient, and few investors expect any movement at the Fed's July meeting," said T. Rowe Price's Chief U.S. Economist. “I think this will put us in a longer-term pattern of higher interest rates,” Lina Urushi told the NYT.
In the 'dot plot' marked by the Federal Reserve members, 8 people said they would cut it twice, 7 people said they would cut it once, 4 people said 'there will be no cuts this year', and 11 people said 'once or nothing' and 'denied the prospect of two cuts' regarding the timing of cuts. Confirmed.
The Federal Reserve's median interest rate at the end of the year is 5.1% (5.0-5.25%), which is 0.25 percentage points lower than the current interest rate, so the consumer price index (CPI) increase rate for May announced today was 3.3%, lower than the market forecast (3.4%). Despite signs of a slowdown in the inflation rate, the American media chose to forecast a one-time cut.
Chairman Powell said at a press conference that day, “The CPI indicator showed progress in slowing inflation, but we cannot move immediately once a good indicator is released.”