Fed chairman Jerome Powell made his first comments since the post-decision press conference on Nov. Gold and Bitcoin prices reacted positively to Powell’s speech. However, the dollar index (DXY) fell below 107 in the initial reaction.
How did Jerome Powell’s speech affect gold, Bitcoin and the dollar?
cryptocoin.comAs you can follow, Fed Chairman Jerome Powell gave his highly anticipated speech today. Speech was perceived as an incoming dove. As a result of the pigeon comments, futures tied to the Fed policy rate point to a 25% increase of 75bps against a 75% chance for a 50bps increase in December.
After the speech, the first reaction in the gold and crypto markets was bullish. Spot gold prices declined during the day as they rose 0.87% to $1,765 at press time. In addition, the cryptocurrency market has also diverged positively. The leading crypto Bitcoin (BTC) rose 3.7% to rise above the $ 17 thousand level again. Leading altcoin Ethereum, on the other hand, rose 6% to approach $1,300.
However, the dollar index (DXY) dropped from the 107 area at the initial release of the talk to test below 106.70. Today’s low remains above 106.29. But it’s below the 20-year high of 114.78 on Sept. 28. The dollar is on track for its biggest monthly loss since September 2010 as investors expect the Fed to hit its highest rate early next year.
Highlights from Fed chair Jerome Powell’s speech
Meanwhile, since the November 2 minutes, markets have focused on other Fed officials shaping the Fed’s message. Because the FOMC statement seemed to point to a pivot. However, President Powell was against the concept of such a pivot during his press conference. The highlights of Fed Chairman Jerome Powell’s speech are as follows:
- It makes sense to raise interest rates at a moderate pace. The time may come at the December meeting.
- We have made significant progress towards a ‘restrictive enough’ policy. However, there are more grounds to consider.
- ‘It seems to me that rates will ultimately be ‘slightly higher’ than policymakers thought in September.
- It is likely to keep the policy at a restrictive level ‘for a while’. History strongly warns against the policy of premature easing.
- We have a long way to go to restore price stability. That’s why we’re staying here until the job is done.
- Inflation continues to be very high. However, October inflation data came as a ‘welcome surprise’. However, ‘significantly more evidence’ is needed to accept that inflation is actually declining.
- We estimate the PCE price index to have increased by 6% in the 12 months to October. Also, Core PCE increased by 5%.
- The road ahead for inflation is ‘quite uncertain’.
- Growth in economic activity slowed to well below the long-term trend. So this needs to be continued.
- It’s too soon to declare commodity inflation defeated. However, if the trend continues, commodity prices should begin to exert downward pressure on general inflation in the coming months.
- If rental trends continue, it’s possible that housing services inflation will start to decline next year.
- So far we have seen only ‘temporary’ signs of moderation in labor demand, wage growth.
- Moderation in the increase in labor demand is needed to restore labor market equilibrium.
- Price stability is the responsibility of nutrition, which is the basis of the economy.
- Given the deterioration in the labor market, the natural rate of unemployment is difficult to ascertain.
- The first rise in inflation is not about wages. But the fees will be significant going forward.
- Probably 1.5 to 2 percent above the currently given adjustments for productivity.
- Today’s JOLTS data shows an ongoing imbalance between demand and supply of workers.
- To bring the workforce back into balance, demand needs to be moderated.
- For most workers, wage increases are now offset by inflation.
- Today’s JOLTS data was more or less in line with expectations. Also, the drop in openings was positive.
- It is too early to tell if there is a possibility that the employment market could return to equilibrium through a decline in open interest.
- Given the deterioration in the labor market, the natural rate of unemployment is difficult to ascertain.
- In this case, the Fed continues to think that the number of unemployed is important against the number of open positions.
- Questions about supply elasticity are an important set of issues the Fed is considering.
- It has been the case that the Fed has been able to ‘scrutinize’ supply cuts. However, I am not sure if it will continue.
- The Fed has a 2% inflation target to meet even if supply conditions change.
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