US Federal Reserve Chairman Jerome Powell informed on Tuesday that US interest rates are likely to be higher than previously thought due to strong economic data. He further pointed out that January data on employment, consumer spending, manufacturing output and inflation indicate a partial reversal of earlier soft trends.
US Federal Reserve Chairman Jerome Powell informed on Tuesday that US interest rates are likely to be higher than previously thought due to strong economic data. He further pointed out that January data on employment, consumer spending, manufacturing output and inflation indicate a partial reversal of earlier soft trends.
This was likely due to “unseasonal warm weather,” Powell said, adding that “if the totality of the data indicates there is a need for rapid tightening, we would be prepared to increase the pace of rate hikes.”
This was likely due to “unseasonal warm weather,” Powell said, adding that “if the totality of the data indicates there is a need for rapid tightening, we would be prepared to increase the pace of rate hikes.”
Powell was speaking before the Senate Banking Committee.
Powell was speaking before the Senate Banking Committee.
The announcement had an immediate impact on US stocks, with the S&P 500 down 0.6% within an hour of trading, despite being relatively flat prior to Powell’s comments.
The announcement had an immediate impact on US stocks, with the S&P 500 down 0.6% within an hour of trading, despite being relatively flat prior to Powell’s comments.
The Fed has already raised its benchmark lending rate eight times since the beginning of last year, as it battles inflation that remains above its long-term target of 2%. The Fed’s preferred inflation measure, the personal consumption expenditure price index, hit an annual rate of 5.4% in January.
The Fed has already raised its benchmark lending rate eight times since the beginning of last year, as it battles inflation that remains above its long-term target of 2%. The Fed’s preferred inflation measure, the personal consumption expenditure price index, hit an annual rate of 5.4% in January.
At the same time, the labor market remains “extremely tight,” Powell said.
At the same time, the labor market remains “extremely tight,” Powell said.
“To restore price stability, we will need to see lower inflation in the sector, and some softening of labor market conditions,” he said.
“To restore price stability, we will need to see lower inflation in the sector, and some softening of labor market conditions,” he said.
US job growth unexpectedly rose in January, while unemployment fell to its lowest rate in more than five decades despite efforts to cool the economy.
US job growth unexpectedly rose in January, while unemployment fell to its lowest rate in more than five decades despite efforts to cool the economy.
While wage growth has slowed, analysts believe it is not yet enough for the Fed.
While wage growth has slowed, analysts believe it is not yet enough for the Fed.
A strong labor market supports income and in turn demand.
A strong labor market supports income and in turn demand.
Policymakers worry that increased wages could drive up inflation, complicating the battle to rein in prices.
Policymakers worry that increased wages could drive up inflation, complicating the battle to rein in prices.
Powell’s appearance on Tuesday comes shortly after the US central bank released its semiannual report on monetary policy, which pointed to a tight labor market, strong job gains, historically low unemployment and high nominal wage growth .
Powell’s appearance on Tuesday comes shortly after the US central bank released its semiannual report on monetary policy, which pointed to a tight labor market, strong job gains, historically low unemployment and high nominal wage growth .
Federal Reserve Chairman Jerome Powell has again warned US banks about the risks of getting involved in the digital-assets industry.
Federal Reserve Chairman Jerome Powell has again warned US banks about the risks of getting involved in the digital-assets industry.
Powell laid out a series of concerns he has with crypto on Tuesday, adding that lenders should be “very careful” when engaging with it. He said the central bank did not want to stifle innovation.
Powell laid out a series of concerns he has with crypto on Tuesday, adding that lenders should “exercise great caution” when engaging with it. He said the central bank did not want to stifle innovation.
“We don’t want regulation to stifle innovation in a way that favors incumbents and things like that,” he said during a hearing before the Senate Banking Committee. The crypto space and what we see is quite a bit of turmoil, we see fraud, we see lack of transparency, we see run risk.”
“We don’t want regulation to stifle innovation in a way that favors incumbents and things like that,” he said during a hearing before the Senate Banking Committee. The crypto space and what we see is quite a bit of turmoil, we see fraud, we see lack of transparency, we see run risk.”
European shares posted their biggest one-day decline in two weeks on Tuesday as investors weighed in on the prospect of a 50-basis point hike by the US Federal Reserve following hawkish remarks from Chair Jerome Powell.
European shares posted their biggest one-day decline in two weeks on Tuesday as investors weighed in on the prospect of a 50-basis point hike by the US Federal Reserve following hawkish remarks from Chair Jerome Powell.
The pan-European STOXX 600 index closed down 0.8%, led by sharp gains in real estate and technology stocks.
The pan-European STOXX 600 index closed down 0.8%, led by sharp gains in real estate and technology stocks.
(with inputs from agencies)
(with inputs from agencies)