Federal Reserve (Fed) Chairman Jerome Powell has highlighted the extraordinary strength of the US economy, saying it is in a “very strong” state with downside risks from the labor market receding.
He also stressed that this resilience gives policymakers room to take a cautious approach as interest rates approach neutral / neither stimulating nor restricting economic activity.
While Powell’s upbeat assessment is reassuring, market expectations for a December rate cut remain intact. His slightly hawkish tone was not enough to change the current market view.
Traders are still expecting a 25 basis point cut at the next Fed meeting, in line with the view that a gradual approach to cuts is warranted given the broader macroeconomic landscape.
Adding to the positive sentiment, two separate surveys showed that US business owners are increasingly confident about the state of the economy and their corporate prospects following Donald Trump’s election victory.
As markets digest these developments, cautious optimism over Powell and Trump's appointment will continue to influence the narrative towards the end of the year, with traders closely monitoring any changes in policy direction or regulatory priorities.
