Jerome Powell, the Chair of the Federal Reserve, indicated that the decision-makers are nearing the point where they will implement their initial rate reduction.
In his address to the Senate Banking Committee, Powell mentioned that the Federal Open Market Committee is prepared to lower rates once they are assured that inflation is on a steady path towards the 2% target.
He expressed that when they gain this confidence – a point they are approaching – it would be suitable to lessen the current level of restriction. He also recognized that the present rates are significantly restrictive.
Further, Powell highlighted the Federal Reserve’s awareness of the potential risks associated with delaying the easing of policies and mentioned their vigilant monitoring of the banking sector. This includes a focus on issues that affected New York Community Bancorp (NYSE:NYCB) and broader concerns related to commercial real estate.
Regarding the risks posed by real estate to banks, Powell described them as “manageable.” He also noted that the Fed has pinpointed banks with substantial commercial real estate investments and is actively engaging with them.
In a related development, Christine Lagarde, President of the European Central Bank, suggested that the ECB may consider policy relaxation in June.
This indication of a dovish stance by the ECB has had a supportive effect on the EUR/USD, sensitive to risk, and also positively influenced European stock markets.
