Why is the Fed not ready to cut interest rates?

Federal Reserve Chairman Jerome Powell reiterated that he expects interest rates to start falling this year but did not give a specific date. Mr. Powell said policymakers are still considering the risks posed by inflation and do not want to cut rates too quickly.

The Fed is not ready to cut interest rates. (Illustration photo).

Comments soon followed that officials remained concerned about undoing progress made in fighting inflation and would make decisions based on aggregate data rather than a pre-set roadmap.

Mr. Powel again noted that cutting interest rates too quickly risks losing the gains in the fight against inflation and may require further rate hikes, but waiting too long would also endanger economic growth.

Investors are now betting on the first rate cut in June and expect three to four more cuts this year. Policymakers will release updated rate projections at the Fed’s meeting this month.

US economic activity increases slightly

The Fed's recent report showed that the US economy has grown slightly since the beginning of the year, with eight regions reporting slight to moderate growth in activity, three regions reporting no change and one region recording a slight decline in economic activity.

US economy increases slightly. (Illustration photo).

The report also showed that consumer spending, especially retail spending, has slowed slightly in recent weeks; businesses are finding it harder to pass on higher costs to customers. Moreover, raw material costs for many manufacturers and construction companies have fallen in recent weeks.

On the labor market, employment continued to increase in most regions, but at a modest pace. Many economists expect the labor market to cool this year.

However, the Labor Department's January jobs report showed employers raised wages by the most in a year. More restrained labor costs could further reduce inflationary pressures that unexpectedly spiked earlier this year.

PHAM DUY

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