Miguel Lopez Chairman of the Federal Reserve, Jerome Powell, emphasized this past Thursday that the Federal Reserve is resolute in its aim to curb inflation, affirming that stringent monetary policies will persist until inflation rates stabilize. While addressing the Economic Club of New York, Powell insinuated that additional hikes in interest rates could become necessary should inflationary pressures continue.
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Continued Focus on Inflation Control
Jerome Powell indicated that, notwithstanding some recent tempering, inflation levels remain excessively high. He observed that while both headline and core PCE inflation have retreated from their highest points earlier this year, it is premature to assert that inflation will align with the Federal Reserve’s 2% objective.
“At this stage, it is still too soon to assert with confidence that inflation will align with our 2% target in a sustainable manner,” said Powell during the luncheon event. “My colleagues and I are collectively committed to achieving a 2% inflation rate in a sustainable way.”
Warning on Economic Growth and Labor Markets
Powell went on to discuss how tightening financial conditions are exerting a downward effect on inflation. He cautioned, however, that a continued buoyant economic growth or a tight labor market could warrant additional monetary tightening measures.
“Evidence of prolonged growth exceeding the trend, or indications that labor market tightness is not receding, could jeopardize further inflationary stability and may necessitate further monetary policy adjustments,” stated Powell to those present.
CME Fedwatch Tool Data as of October 19, 2023
Emphasizing that long-term Treasury yields have experienced a significant rise, thereby affecting financial conditions, Powell noted that the Federal Reserve is vigilantly monitoring these changes. “Enduring shifts in financial conditions can significantly impact the trajectory of our monetary policy,” remarked Powell.
This week saw the 10-year Treasury yield soar to a 16-year high at 4.9%. Following Powell’s statements, data from the CME Fedwatch tool suggest a 99% probability of a rate hike in the coming month. Market participants anticipate another 0.25 percentage point increase in rates at the Federal Reserve’s November meeting.
The Federal Reserve’s Stance on Inflation
In summary, Powell reiterated the Federal Reserve’s unyielding commitment to containing inflation, targeting a long-term objective of a 2% rate. He effectively communicated that the Federal Reserve will remain in a policy-restrictive posture until there is sufficient confidence that inflation is moving towards that target.
Market Reactions
Subsequent to Powell’s comments, all four major U.S. stock indices experienced a decline. Conversely, precious metals recorded a minor rise, while the cryptocurrency markets appeared largely impervious to Powell’s declarations. The downturn in the U.S. equity markets was directly attributed to his speech in New York.
We invite readers to share their viewpoints and insights on Jerome Powell’s recent statements at the Economic Club of New York in the comments section below.
Frequently Asked Questions (FAQs) about Federal Reserve Monetary Policy
What was the main subject of Federal Reserve Chairman Jerome Powell’s recent speech at the Economic Club of New York?
The main subject of Jerome Powell’s recent speech was the Federal Reserve’s ongoing commitment to controlling inflation. He indicated that stringent monetary policies, including potential further hikes in interest rates, would continue until inflation rates stabilize.
What did Jerome Powell say about the current state of inflation?
Jerome Powell stated that despite some moderation, inflation levels remain excessively high. While headline and core PCE inflation have retreated from their peak levels earlier this year, he emphasized that it is too early to be confident that inflation will sustainably align with the Federal Reserve’s 2% target.
What warning did Powell issue regarding economic growth and labor markets?
Powell cautioned that continuous strong economic growth or persistent tightness in the labor market could necessitate further monetary tightening measures. Such conditions could jeopardize the Federal Reserve’s goals of achieving inflationary stability.
What does the CME Fedwatch Tool indicate following Powell’s statements?
Following Powell’s remarks, the CME Fedwatch Tool indicates a 99% probability of an interest rate hike in the next month. Market participants anticipate a 0.25 percentage point rate increase at the Federal Reserve’s upcoming November meeting.
How did the markets react to Powell’s comments?
Following Powell’s speech, all four major U.S. stock indices experienced a decline. Conversely, precious metals recorded a minor rise, while the cryptocurrency markets were largely unaffected. The downturn in the U.S. equity markets was directly attributed to Powell’s statements.
What is the Federal Reserve’s long-term objective concerning inflation?
The Federal Reserve’s long-term objective concerning inflation is to achieve and maintain a 2% inflation rate. Powell reiterated the Federal Reserve’s unyielding commitment to this goal and stated that restrictive monetary policies would remain in place until there is sufficient confidence that the target will be met.
What impact did Powell’s speech have on long-term Treasury yields?
Powell emphasized that long-term Treasury yields have risen sharply, thereby tightening financial conditions. The 10-year Treasury yield reached a 16-year high of 4.9% in the week following his speech.
More about Federal Reserve Monetary Policy
- Federal Reserve’s Official Statement on Monetary Policy
- Transcript of Jerome Powell’s Speech at the Economic Club of New York
- CME Fedwatch Tool
- Historical Data on 10-Year Treasury Yields
- U.S. Stock Market Indices
- Latest Developments in Precious Metals
- Cryptocurrency Market Reactions
- PCE Inflation Overview
7 comments
Interesting read. If the feds keep tightening, wonder what this means for crypto markets. So far they’ve been pretty resistant, lets see how long that lasts.
Im a bit skeptical here. High interest rates might cool down inflation but at what cost? Small businesses could take a hit, and dont get me started on the housing market.
Powell sure is taking a hard stance on inflation. It will be interesting to see how this plays out in the upcoming midterms. Could be a political game changer.
A very comprehensive article, hats off to the author! Inflation has been a serious concern, and its about time the Federal Reserve takes some concrete steps. But what about the average Joe? Higher interest rates means harder to get loans, right?
The market’s reaction was expected, especially in the stock indices. Precious metals going up is also no surprise, they’re the go-to hedge against inflation. Good article though, very informative.
Not much on how this affects the automotive market, but a rate hike is usually bad news for big ticket items like cars. Gotta say, this could be a rocky road ahead.
Wow, this is eye-opening. Cant believe the fed is gonna hike the rates again, this could spell trouble for a lot of people.