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Energy Prices · Federal Reserve · Interest Rates · Jerome Powell
Federal Reserve Chair Jerome Powell announced Monday that policymakers will likely maintain the current interest rate target range of 3.5% to 3.75%, opting to disregard rising energy prices stemming from the Iran war, which significantly reduced market expectations for a December rate hike to just 2.2%.
Powell, in one of his final public appearances before his term concludes in May, emphasized that the Fed should look past short-term supply shocks and focus on stable prices and low unemployment. He noted that hiking rates now to counter temporary war-related inflation would be ineffective due to policy lag.
This stance calmed traders, as evidenced by CME FedWatch data showing a dramatic drop in rate hike odds from over 50% to 2.2%. While the Fed's "dot plot" from an earlier meeting indicated one rate cut this year and another in 2027, seven of 19 members do not anticipate any cuts this year, highlighting internal division.
The article also touches on the political uncertainty surrounding Powell's successor, Kevin Warsh, whose nomination is currently blocked by Senator Thom Tillis.
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The Richmond Fed president said holding interest rates steady in March was the right move amid a long stretch of elevated uncertainty.
