Federal Reserve Signals Rate Cuts

United States — Federal Reserve Chair Jerome Powell indicated that the central bank is likely to cut its key interest rate two more times this year, following a September reduction. This decision is driven by a sharp slowdown in United States hiring, which poses increasing risks to the economy. Powell also suggested that the United States — Federal Reserve may soon stop shrinking its roughly $6.6 trillion balance sheet, a move that could further lower longer-term borrowing costs. He defended the United States — Federal Reserve's past purchases of longer-term Treasuries and mortgage-backed securities during the pandemic, which have been criticized by figures like Treasury Secretary Scott Bessent for allegedly exacerbating inequality. Powell acknowledged that with hindsight, asset purchases could have stopped sooner but maintained they were necessary to prevent a breakdown in the Treasury securities market and serve as insurance against downside risks. A bipartisan effort in the United States Senate to stop the United States — Federal Reserve from paying interest on cash reserves was defeated, with Powell arguing that such a move would cause the United States — Federal Reserve to lose control over rates.