Fed rate cut 'extremely unlikely' to come in early 2024
Federal Reserve Chair Jerome Powell talked about regulators' interest rate outlook in a speech at Spelman College on Friday, calling rate cuts a "premature" notion currently.
Chicago Booth Professor and Former Fed Governor Randall Kroszner highlights certain misconceptions on rate cuts being taken from Powell's comments as the Fed continues fighting toward its inflation target.
"It's going to take a while to get anywhere close to 2%, and I don't think they're cutting any time in advance of getting very close to that 2% goal," Kroszner explains.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
https://pnr.ouryahoo.com/video/73b98b21-19c2-3aee-92bb-a34c4b1bc4fe
Video Transcript
JULIE HYMAN: Joining us now Chicago Booth professor and former Federal Reserve governor Randall Kroszner.
Randy, it's great to see you.
Really happy to have your perspective on a day like this when we heard from Jay Powell.
Related Videos
So he seems to be saying, don't get ahead of yourselves here and the market has already moved on.
Do you think that they're wrong?
Do you think that-- how strong is the possibility that the Fed could raise further?
RANDALL KROSZNER: So exactly as Jay said, if the data suggests that the inflation rate is not coming down, they'll raise rates.
The likelihood that that happens in the next few months, I think, is pretty low.
So I think it's reasonable that it's-- to assess they're unlikely to be raising rates.
But I think the market tried to hear in there that, oh, and we'll be cutting soon.
I didn't hear that at all.
And I don't think Jay intended that and I don't think his colleagues intended that at all.
I think they're, sort of, taking out the-- they're reducing the likelihood that they're going to be raising rates, but I think they're going to be holding rates steady for quite some time.
JOSH LIPTON: And Randy, just to push on that, billionaire investor Bill Ackman saying he thought the first cut could come as soon as the first quarter.
You seem to be saying, Randy, you think that's unlikely?
RANDALL KROSZNER: I think it's extremely unlikely.
Now, of course, if there's some sort of cataclysmic shock that comes to the US or global economy, they'll respond.
But putting that aside, the key inflation rate that they really focus on is not the CPI, but something that comes out with the GDP report.
It's the Personal Consumption Expenditure index, the PCE.
And not just the overall number, but the so-called core number that takes out the more volatile food and energy sectors, that was just reported at 3.5%.