- Fed Chairman Jerome Powell described low inflation as likely “transitory,′ not ’persistent.”
- Powell, speaking after the Fed’s meeting, said the central bank would consider policy moves if inflation was persistently low.
- The markets have been pricing in a Fed rate cut, and Powell’s comments suggest the Fed is not considering a cut at this point.
It only took one word from Fed Chair Jerome Powell on inflation to send the markets reeling, and that word was “transitory.”
Traders have been speculating that recent weaker inflation readings would concern the Federal Reserve so much that it would cut interest rates later this year. Powell knocked that idea, by explaining that the central bank still sees the weakness as the result of “transitory” factors, such as portfolio management services, lower apparel prices and airfares.
The Fed’s target on inflation is 2%, and the core PCE rate watched by the Fed fell to a surprising 1.6% in the first quarter.