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Fed’s Powell says could raise rates beyond December, gives nod to disinflation By Reuters

Fed's Powell says could raise rates beyond December, gives nod to disinflation

© Reuters. FILE PHOTO: An eagle tops the U.S. Federal Reserve building’s facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst

NEW YORK (Reuters) – Federal Reserve Chairman Jerome Powell said on Wednesday he is not fully sure where the central bank will stop with rate rises as it presses forward with its efforts to cool inflation.

“There is more work to do” and the Fed has not decided where it will stop rate rises, with the possibility the Fed will go above the 5.1% federal funds rate it penciled in as a terminal rate in its December forecasts, he said in a press conference following the Federal Open Market Committee meeting.

But Powell did give a nod to disinflation, which he said is in its early stages.

The Federal Reserve raised its target interest rate by a quarter of a percentage point on Wednesday, yet continued to promise “ongoing increases” in borrowing costs as part of its still unresolved battle against inflation.

MARKET REACTION:

STOCKS: U.S. stocks turned higher in the wake of Powell’s remarks.

BONDS: U.S. Treasury yields extended their fall.FOREX: The U.S. dollar extended losses following Fed’s Powell’s remarks.

COMMENTS:

ANGELO KOURKAFAS, INVESTMENT STRATEGIST, EDWARD JONES, ST LOUIS 

“Powell wasn’t as hawkish as feared. We’ve seen for around three-and-a-half months a significant easing in financial conditions, with equity markets rising, bond yields falling, the dollar falling, mortgage borrowing costs dropping from the highs…there was a question about that on the press conference.” 

“Powell could have used that as an opportunity to recalibrate expectations. He didn’t take that opportunity.”

“Clearly Powell has said the job isn’t done yet but that progress has been made in disinflation. The fact he acknowledged that provided some comfort together with him not pushing back hard on the question about easing of financial conditions.”

“Market participants thought he would push back against market expectations we’re going to have immediate pause or rate cuts. The fact he didn’t narrow down or focus on short term easing conditions was the point where the market turned positive.”

“He had an opportunity to relay a hawkish message and didn’t take it. He could’ve said that markets are getting overly excited and he didn’t take the opportunity. Instead he said a lot of tightening has already happened.”

“He cannot declare victory yet and we have a lot of data points between now and March. So because investors have seen…

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