US Federal Reserve Chairman Jerome Powell emphasized the need for milder labor markets to combat inflation. He cautioned that the central bank stands ready to elevate interest rates further if deemed necessary.
Powell’s Address Points to Tightening Monetary Stance:
Speaking at the Economic Policy Symposium, commonly referred to as the Jackson Hole meeting organized by the Federal Reserve Bank of Kansas City, Powell revealed the Fed’s plan to maintain interest rates at a restrictive level until they are assured that inflation is consistently approaching their 2% goal. Traders were keenly awaiting Powell’s insights on the broader economic outlook given the prevailing macroeconomic unpredictability.
He detailed that the central bank’s decision-making body will tread cautiously regarding future rate hikes. The prevailing target rate is between 525 to 550 basis points. The forthcoming Federal Open Market Committee (FOMC) meeting is slated for September 20, 2023. Current indicators from the CME FedWatch Tool show a 78% trader confidence leaning towards a halt in rate hikes for the next gathering. Since last year’s Jackson Hole symposium, there has been a significant 300 basis point rise in interest rates.
Reaffirming the Fed’s commitment, Powell mentioned that further progress is essential, especially in non-housing services inflation. He underscored the central bank’s dedication to upholding price stability in the financial landscape.
Bitcoin and Market Response:
Following Powell’s address, Bitcoin witnessed a minor decline, and the S&P 500 Index also experienced a small drop. However, both rebounded notably soon after. The Nasdaq Composite Index climbed by 0.6%, and the Dow Jones Industrial Average marked a 0.3% uptick.