Federal Reserve Chairman Jerome Powell said Wednesday that there is no doubt the Fed is ready to raise interest rates just enough to stifle inflation, even though it is aware it is slowing the pace of rate hikes.
In a press conference after the Federal Open Market Committee (FOMC) decided to raise interest rates by 0.75 points for the fourth consecutive meeting, he said: “The data we have received since the last meeting shows that the level final interest rates will be higher than previously assumed, suggesting, “he said.
The target range for the Federal Funds (FF) rate, which was 0-0.25% before the start of the rate hike in March, is now 3.75-4%. However, the US economy is showing extraordinary resilience. Rising mortgage rates are holding back the housing market, but inflation remains at its highest level for nearly 40 years.
“There is still a long way to go before we reach a level that would be considered sufficiently binding,” Powell said, warning investors that the tightening campaign was not over yet.
He said it was “very early to think of a setback,” but said it might be appropriate to slow down the pace of rate hikes “at the next meeting or soon.”
In the 30 minutes following the announcement of the FOMC statement, the S&P 500 stock index rose 1% at one point, but turned into a decline due to the president’s remarks that it was “premature”, etc. . And the closing price of 2nd place fell by 2.5% and the FOMC policy decision was announced. It was the worst performance for one day since January 2021. It was the first time since 2008 that the S&P 500 fell more than 1% on policy day twice in a row, according to Bloomberg data.
The US 2-year yield, which is more sensitive to the predicted trajectory of US monetary policy, temporarily dropped after the release of the statement, but investors are pricing in a higher terminal rate (the ultimate destination of interest rates) by as provided above. enlargement added about 6 basis points (bps, 1 bp = 0.01%).
Powell’s challenge at this meeting was to signal a slowdown in rate hikes without misrepresenting that the Fed was nearing the end of its tightening campaign. The president said the pace of interest rate hikes would slow as the Fed approaches the terminal rate, but stressed that the terminal rate itself would be higher than officials’ expectations in September, overcoming this challenge.
Following the president’s remarks, attention now shifts from the magnitude of the next rate hike to where the policy rate peaks and how long it stays at those levels.
“That was the most important thing during this meeting. There is nothing else to know,” said Eric Wiseman, chief economist and portfolio manager at MFS Investment Management.
Fed President Jerome Powell at press conference (November 2)
Source: Bloomberg
Original title:Powell reports a slower speed increase on the path to the highest peak
Bait-and-Switch Powell turns off the lights on the half-hour market party(extract)
