“We will stay the course until the job is done.”
(Photo: AP)
Washington US Federal Reserve Chairman Jerome Powell got the financial markets in the mood for a less aggressive rate hike ahead of the last Fed meeting of the current year. “As early as December” could be the time to slow down the pace of interest rate hikes, the Federal Reserve governor said Wednesday at an event hosted by the Brookings Institution think tank in Washington.
However, the fight against inflation is not over yet. In addition, it is likely that the Fed will ultimately have to raise the key interest rate to a slightly higher level than the monetary authorities had signaled in their September projections with a level of 4.6 percent. However, Powell did not name a number.
In order to get inflation under control, it is necessary to keep monetary policy at a restrictive level for some time, which will rein in the economy. This is seen as a rejection of a rate cut that some investors are anticipating next year.
There is still “no clear progress” in slowing inflation, Powell said: “We will stay the course until the job is done.”
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Markets took Powell’s speech positively. According to the most important statements, the Dow Jones index of standard values rose by 0.6 percent to 34,072 points. The broader S&P 500 gained 1.2 percent to 4,005 points. The two indices were slightly in the red when they opened on Wednesday. The Nasdaq index jumped 2.1 percent to 11,212 points after trading little changed.
At the beginning of November, the Fed raised the key interest rate by 0.75 percentage points for the fourth time in a row – to the new range of 3.75 and 4.00 percent. In the meantime, several monetary authorities have signaled that they could advocate smaller steps.
Because there are now increasing signs that the high inflationary pressure is falling more than expected – both in terms of consumer and producer prices. A rate hike of just 0.50 percentage points at the mid-December meeting is therefore more likely from the point of view of many investors.
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As the minutes of the most recent Fed meeting show, a debate has also started among Fed executives about the risks of raising interest rates too quickly. Currency watchdog Esther George believes it is becoming increasingly difficult to contain inflation without triggering a recession.
Consumer sentiment has recently clouded over due to rising inflation expectations. In addition, the once booming real estate market is cooling down, as mortgage costs are increasing significantly due to the rise in interest rates and building materials have also become much more expensive as a result of the upward trend in prices. On average, a new house cost $493,000 in October – an increase of 15.4 percent compared to the same month last year.
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