Bloomberg News reports that Federal Reserve Chair Jerome Powell has revealed that the policymakers are planning for a few more hikes in rates before halting the tightening campaign for some time. The move will be in place even though they are still working on measures to tame inflation.
Powell and his team members have raised the target of the Fed. The target is raised upto the benchmark rate by a quarter percentage point between 4.5% and 4.75%. The smaller move followed a half-point increase in December, along with four jumbo-sized 75 basis point rises just before that.
Despite the scenario, investors have taken to heart the remarks of the Chair, admitting that the price pressures will begin to ease. The Chair has emphasized the outlook of the Fed for even more hikes in rates. The S&P 500 closed 1% higher following his speech, and after the two-year yields dropped sharply.
Powell Says a Lot Covered
While talking to the reporters after the meeting, Powell said they had covered a lot. Even though they have got more work to do. The Federal Open Market Committee voted unanimously.
A statement issued by the Fed stated that the committee is anticipating that increasing the target range persistently will be an appropriate move. Due to this the restrictive monetary policy might return inflation to 2%. This statement was issued following the policymaking meetings that were held over two days.
Is the Hiking Cycle Nearing an End?
In a slight hint that the hiking cycle might end, the committee said that the extent to which the future rates will be raised would vary. It would depend on several factors. These factors include cumulative tightening monetary policy.
Bloomberg News reports that few investors wanted to know if Powell is planning to push back against the expectations in the market. The Fed will be cutting rates later in 2023 with the easing of inflation and a slowdown in economic growth.
He also revealed to reporters that restoring price stability will require maintenance of a strict stance for some time. Even though the current readings about price pressures were encouraging, cutting rates sooner is not in the vicinity. This applies if the economy behaves as expected by him and his team.
He also dismissed the surge in prices as momentary. And to this effect, the Fed policymakers have been struggling to get control over runaway inflation before it gets embedded in the economy. So there are raising rates from those levels that were close to zero recently one year ago.
They are also discarding the idea that the price surge is only temporary. Fed’s balance sheet is experiencing a record plunge, with withdrawals of hundreds and billions of dollars from this financial system.
