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Fed Chair Warns Of Fewer Rate Cuts Than Market Expects

U.S. Federal Reserve Chairman Jerome Powell said in an interview on “60 Minutes” that the central bank is likely to make fewer interest rate cuts this year than the stock market expects.

Powell added that the Fed will proceed carefully with any interest rate cuts this year and is likely to move at a slower pace than many investors and traders would like or expect.

“We want to see more evidence that inflation is moving sustainably down to 2%,” Powell said concerning the timing of interest rate cuts. “Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.”

Powell also reiterated that the central bank is unlikely to make its first interest rate cut in March of this year, which futures markets had previously priced in.

At the end of January, the Fed held its benchmark interest rate at its current level of 5.25% to 5.50%.

Markets are currently pricing in as many as five quarter-percentage point interest rate cuts in 2023. But Powell has said that three interest rate cuts this year is more realistic, especially as the U.S. economy remains strong.

“We’ll update (the outlook) at the March meeting. I will say, though, nothing has happened in the meantime that would lead me to think that people would dramatically change their forecasts,” said the Fed Chair when speaking to 60 Minutes.

Powell added that the biggest risk to the U.S. central bank’s current outlook are geopolitical events such as the current wars in Ukraine and the Middle East.

The Fed’s next decision on interest rates is scheduled for March 20.