Jerome Powell didn’t reveal much new during a public appearance Tuesday night. He said that if inflation rises, the Fed will have to raise interest rates more than originally planned. He also expects that the two percent inflation, which is the goal of the Fed, could not be reached until 2024. However, he expects a significant decrease already this year.
The head of the Fed confused the markets last Wednesday when most investors interpreted his statements to mean that the central bank will raise interest rates for the last time in March and begin their gradual reduction in the second half of the year. Shares of American companies reacted to this with a sharp increase. The S&P 500 index strengthened by 2.24 percent to 4111.08 points in the last five days. The Nasdaq Composite rose 4.29 percent to 11,887.45 points.
However, the enthusiasm of the stock market was soon overshadowed by the publication of the January employment data, which, on the contrary, increased the prospects for further rate increases. “Many see Powell’s appearance on Tuesday as an opportunity to clarify his words,” the station writes CNBC. So today the governor will either revive hopes for an early end to strict monetary policy, or, on the contrary, will return to earlier hawkish rhetoric.
According to one of the members of the Fed’s Board of Governors, Neel Kashkari, “the central bank has not yet cooled inflation enough to declare victory over it.” In contrast, US Treasury Secretary Janet Yellen said on Monday that “the United States may avoid a recession this year as inflation rates decline and the labor market remains strong.”
At the last meeting, the Fed raised the key interest rate by 25 basis points to 4.5 to 4.75 percent. Interest rates in the US are thus at their highest level since 2008. However, Powell also slowed the pace of increases when he raised rates by 50 basis points in December and by 75 points repeatedly before that.
