Powell Slightly Hawkish Ahead of December Meeting

The S&P 500 and Nasdaq Composite indexes both gained about 1% and 1.5% in the moments following Powell’s speech


Inflation is far from over, Federal Reserve Chair Jerome Powell said Wednesday, but a rate-hike slowdown is still on the table for December. Regardless, according to the central bank head, rates will keep rising and remain high “for some time.” 

“It will take substantially more evidence to give comfort that inflation is actually declining,” Powell said during an appearance at the Brookings Institute in Washington. “By any standard, inflation remains much too high.”

Markets immediately rallied on the news. The S&P 500 and Nasdaq Composite indexes both gained about 1% and 1.5% in the moments following Powell’s speech, respectively. Crypto also jumped into the green, with bitcoin and ether rising 3% and 5.3%, respectively. 

“We need to raise interest rates to a level that is sufficiently restrictive to return inflation to 2%,” Powell said. “There’s considerable uncertainty about what rate will be sufficient.”

Stable prices can only be achieved through supply and demand management, Powell said — adding that reaching the central bank’s inflation target is likely going to require more-tempered growth. Waning of pandemic-era easy monetary policy, raising housing prices and global unrest have also contributed to the economy’s sluggish pace, Powell added. 

The speech comes weeks after the Fed’s last rate-setting meeting on Nov. 2 when the central bank opted to raise interest rates by 0.75% for the fourth straight time. The US central bank cited slowing consumer spending and production levels.

In June, when the central bank opted to raise rates 75 basis points for the first time this cycle, Powell called the move “unusually large.”  But if current conditions persist, higher increases could become the norm, he later warned.

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