Fed Chairman Powell Comments on Disinflationary Process and Rate Increase Expectations
Today, investors are anxiously looking forward to Jerome Powell, Chairman of the Federal Reserve, speaking before the Washington Economic Club.[0] Markets are waiting for clues regarding future interest rate movements following the jobs report on Friday, which was much better than expected.[0] Powell's hawkish comments are likely to have an impact on the market's direction in the coming days.[0]
Powell spoke in a question-and-answer session at The Economic Club of Washington, D.C., Tuesday.[1] He said that the disinflationary process has begun, but it has a long way to go and that these are the very early stages.[2]
On Tuesday, Powell stated during a question-and-answer session with David Rubenstein at the Economic Club of Washington that additional rate increases are likely to be necessary.[1] The job market is exceptionally robust.[3] He added that the process is likely to take quite a bit of time and it's not going to be smooth.[4]
The central bank had hiked interest rates eight times in a row prior to the release of the report, bringing the Federal Reserve's base rate of policy up to a range of 4.5 to 4.75 percent.[4] As inflation had lessened, policymakers chose to go at a slower speed than nearly all of the previous year, opting for a quarter-point raise as they get ready to end rate increases.[4] Powell stated that the policy makers had intentions of increasing the rates a few more times to get the borrowing costs high enough to have a significant impact on the economy, beyond 5%.[5]
The market is currently predicting that the Federal Reserve will increase interest rates by a quarter-point on March 22nd, with a 76% chance of an additional quarter-point increase on May 3rd.[6] December Fed projections showed that the federal funds rate would reach a maximum of 5%-5.25%, and with this change that range would be achieved.[6]
Neel Kashkari, President of the Minneapolis Federal Reserve, informed Bloomberg News that the impressive job report demonstrated that the Federal Reserve has not yet accomplished its task.[4] He reiterated his assessment that rates should increase to approximately 5.4 percent.[4]
Kashkari noted in an interview on CNBC's “Squawk Box” that increasing rates can restrain inflation.[7]
0. “Stock Market News Today: Indices Turn Volatile after Powell Speech” TipRanks, 7 Feb. 2023, https://www.tipranks.com/news/stock-market-news-today-futures-up-ahead-of-powell-speech
1. “Powell Says Further Rate Hikes Needed Amid ‘Strong' Labor Market” Bloomberg, 7 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-07/powell-says-further-rate-hikes-needed-amid-strong-labor-market
2. “Fed Chair Powell: Inflation fight will take ‘a significant period of time'” CNN, 7 Feb. 2023, https://www.cnn.com/2023/02/07/economy/jerome-powell-economic-club-speech/index.html
3. “Fed Chair Powell: Inflation fight will take ‘a significant period of time'” Channel3000.com – WISC-TV3, 7 Feb. 2023, https://www.channel3000.com/news/money/fed-chair-powell-inflation-fight-will-take-a-significant-period-of-time/article_211c5f36-b41b-596b-ac13-2236c9762316.html
4. “Fed's Powell speaks on economy, job market” The Washington Post, 7 Feb. 2023, https://www.washingtonpost.com/business/2023/02/07/powell-economy-jobs/
5. “Fed's Jerome Powell Says Hiring Surge Shows Why Inflation Fight Could Be Difficult” The Wall Street Journal, 7 Feb. 2023, https://www.wsj.com/articles/feds-jerome-powell-to-address-economic-outlook-with-hiring-surge-in-spotlight-11675781503
6. “Fed Chair Jerome Powell Sticks To Disinflationary Script; S&P 500 Slips” Investor's Business Daily, 7 Feb. 2023, https://www.investors.com/news/economy/fed-chair-jerome-powell-sticks-to-deflationary-message-sp-500-rises/
7. “Stock market news live updates: Stocks swing as investors mull Powell remarks” Yahoo News, 7 Feb. 2023, https://news.yahoo.com/stock-market-news-live-updates-february-7-2023-120657185.html
