Powell warns: more rate hikes
Jerome Powell warns the markets: the disinflation process has begun, but “it is in its initial stages and the road is long”. During a debate at the Economic Club of Washington, the president of the Fed he stressed that more interest rate hikes will likely be needed to muzzle inflation. In fact, Powell confirmed the key message launched by the Fed after last week’s FOMC meeting.
To the Federal Reserve”we think more rate hikes will be needed and that they will have to remain at restrictive levels for some time” and last Friday’s data on the labor market “were certainly strong, higher than our expectations” and “demonstrate why the disinflationary process will take time” and can be “bumpy” .
Prices down in 2023, but Fed ‘still has work to do’
The governor explained that the Fed has no plans to change its inflation target to 2%. In fact, Powell defined 2% as “a global standard” and that to reach it we will have to wait at least until 2024. However, the Fed president defined the 2023, however, as “a year of significant price declines”.
A position that had initially made the American stock markets turn, with the Dow Jones and the Nasdaq rising in positive territory. But the U-turn did not last long, also due to Powell’s decisive position on the Fed’s next moves. In fact, the president reiterated that the ongoing interest rate hikes “are appropriate” and that in the light of recent market data of work “the Fed still has a lot of work to do.”
The US labor market created more than 500,000 jobs in January, well beyond analysts’ expectations, with the unemployment rate down to its lowest since the late 1960s.