Jerome Powell of the Federal Reserve is holding out hope of an interest rate cut later this year.
Powell stressed that there are two main conditions for the Fed to cut rates: inflation convergence and a weaker labour market.
However, inflation control does not seem imminent, so the focus is on labour market developments over the coming months. Although the labour market has lost momentum, it remains healthy overall, showing signs of economic resilience.
Powell states that it is still possible that we will see one or two rate cuts, which is in line with market expectations.
He added that movements in the currency markets, particularly in the yen, had led to speculation that the Fed might intervene. Sovereign bond yields and the yen have attracted attention, but he believes that the focus on Bank of Japan intervention is distracting from the main issue: the future of the yen.
Powell also says that the market is underestimating potential volatility, believing that a return of the yen to its previous level could take longer than expected.
Bloomberg TV provided by MT Newswires
