**Powell: Fed Cautious After Rate Cut**

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Post on Nov 08, 2024

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Powell: Fed Cautious After Rate Cut, But Hints at Further Action

The Federal Reserve (Fed) has cut interest rates by a quarter of a percentage point, signaling a shift in its monetary policy stance. However, Fed Chair Jerome Powell emphasized caution, suggesting that this move might not be the start of a sustained easing cycle.

A Shift in the Wind?

The rate cut, which brought the federal funds rate target range to 5.00% to 5.25%, was the first since the Fed embarked on its aggressive tightening campaign last year. The central bank's decision comes amid growing concerns about the potential economic impact of recent banking turmoil.

However, Powell's remarks during the press conference following the meeting suggested that the Fed is not yet ready to embrace a more dovish approach. He acknowledged the "uncertain" economic outlook and highlighted the need to monitor incoming data closely.

Focus on Inflation Remains Key

Despite the rate cut, the Fed's primary focus remains taming inflation. Powell emphasized that inflation remains "unacceptably high" and reiterated the commitment to achieving the 2% target.

He stressed that the Fed will need to "see convincing evidence that inflation is moving down sustainably toward 2%" before considering further rate reductions.

What Does This Mean for the Markets?

The market reaction to the Fed's decision has been mixed. While the rate cut initially triggered a rally in stocks, the cautious tone of Powell's remarks led to some profit-taking.

The uncertainty surrounding the Fed's future path remains a key factor influencing market sentiment. Investors will be closely watching economic data and Fed statements in the coming months for clues about the central bank's next move.

Key Takeaways

• The Fed's rate cut reflects concerns about the economic impact of banking turmoil, but does not signal a shift to a more dovish stance.
• Inflation remains the Fed's top priority, and further rate reductions will depend on "convincing evidence" of its decline.
• The Fed's cautious approach and uncertain economic outlook contribute to volatility in the markets.

This recent decision by the Fed is a significant development with potential implications for investors, businesses, and the overall economy. The coming months will be crucial in determining the trajectory of monetary policy and its impact on financial markets.