Bloomberg News reports that Jerome Powell, the Chair of the Federal Reserve, has suggested that the US central bank is interested in holding the interest rates steady again at the next meeting. It is also expected to leave open the probability of future raises if the policymakers have seen any further signals of resilience in the country’s economic growth.
Market Expectations
The comments affirm the market expectations for the Federal Reserve to skip the rate hike at the second meeting scheduled for October 31 and November 1. According to a recent long-term run-up in the Treasury yields, it could reduce the need for another hike at margin if this stays. He echoed his colleagues and underscored the value of financial tightening to the rate outlook over the forthcoming months.
Was There a Decline in Treasuries Following Powell’s speech?
There was a drop in the yield on two-year Treasuries after Powell’s speech. Also, the 10-year yields pared a surge, pushing them to the 5% mark. The dollar dropped against the major currencies. The S&P 500 index stocks dropped after several twists and turns.
Disruption from Protesters
Even before Powell could start talking, due to the disruption from protesters, he was escorted out of the hall at the New York event. “End fossil finance” was what the protesters were chanting, standing arm in arm. They forcefully removed him from the dais.
Bloomberg News reports that the policy rate remained unchanged by the officials in the past month in the range of 5.25% to 5.5%. The forecasts showed that 12 out of the 19 officials required one more hike in the current year. However, Powell made sure in his speech that he did not rule out the probability of further tightening.
Leaving aside the volatility in energy and food prices, the core inflation decreased below 4% annually and 3% on a three-month annualized measure.
Economic Strength
The recent economic data showed that retail sales in the US exceeded the predictions. The industrial production was stronger in September, and the nonfarm gains in payroll averaged 266,000, offering a robust pace over the past three months.
The three- and month core inflation measures run below 3%. Powell has sent a warning that there are chances of volatility in short-term measures, as this is what happens in most cases. He said there is adequate evidence that the Fed’s rate hike is exerting downward pressure on the economy. However, he also said there might be worthwhile tightening in the future.
