Powell turns "dovish" and acknowledges that inflation is declining

Zhitong App has learned that Federal Reserve Chairman Powell stated that the inflation issue has eased but remains relatively high. He acknowledged that the measures taken by the Fed have begun to have an impact on curbing inflation, but he emphasized that more work needs to be done.

Powell said at a press conference, "The inflation rate has fallen from its peak, and the unemployment rate has not risen significantly. This is very good news. However, the inflation rate is still too high. To eliminate this situation, the possibility of sustained progress is uncertain, and the path forward is also filled with uncertainty."

Looking ahead to 2024, Powell emphasized that the Fed is committed to lowering the inflation rate to the target of 2%. He stressed that restoring price stability is crucial for achieving and maintaining a strong labor market.

Powell also mentioned that economic growth in the fourth quarter has "significantly slowed down." He pointed out that the Fed expects the U.S. economy to lose momentum in the last few months of this year.

Powell said, "Recent indicators show that the pace of economic activity has slowed significantly from the rapid growth in the third quarter. Nevertheless, the annual Gross Domestic Product (GDP) is still expected to grow by about 2.5%."

He also noted that the activity in the real estate market has "tended to stabilize" after the summer, and data shows that the rise in interest rates is slowing down business investment.

Krishna Guha, Vice Chairman of Evercore, commented, "The Federal Open Market Committee's statement and the new economic forecast summary are moderate and somewhat adventurous. The new language in the statement assesses that 'inflation has eased in the past year' and lowers the median forecast for next year by one-third."

Callie Cox from eToro said, "The Fed believes that the economy will achieve a soft landing. Obviously, the market now believes this too. Fed members now expect several interest rate cuts in 2024, which also seem celebratory. No one can predict the future, so it is important to remain flexible and remember that interest rates may remain relatively high for a period of time. But the Fed's stance may keep the rate cut trades going until the end of the year."

Gina Bolvin, President of Bolvin Wealth Management, said, "The Fed gave the market an early holiday gift today by making positive comments on inflation for the first time. As they acknowledge that inflation is coming down, we have seen a turning point. It seems that the Fed is moving towards the direction of the market, rather than the market moving towards the Fed. The Santa Claus rally may continue."