Jay Powell signals Federal Reserve will slow pace of rate rises in December
02 Dec 2022
Jay Powell signals Federal Reserve will slow pace of rate rises in December
Jay Powell has sent a strong signal that the Federal Reserve will slow the pace of interest rate rises next month in an otherwise hawkish speech warning that the US central bank has a long way to go in its fight against inflation.
“The time for moderating the pace of rate increases may come as soon as the December meeting,” the Fed chair said during an appearance at the Brookings Institution on Wednesday.
The remarks from Powell suggest the Fed is preparing to “downshift” to a 0.5 percentage point increase when it meets in two weeks after it raised rates by 0.75 percentage points at each of its past four meetings.
“My colleagues and I do not want to overtighten,” Powell said in a question-and-answer session following the speech.
Powell balanced his comments about the forthcoming rate decision with a full-throated pledge that the Fed would not relinquish its fight against inflation until price pressures had slowed to a level more in line with its longstanding 2 per cent target.
“I will simply say that we have more ground to cover,” he said. “History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”
Investors focused on Powell’s endorsement of a slower pace of rate rises, prompting a 3.1 per cent rally in the S&P 500, which registered its first stretch of back-to-back monthly gains since last summer. Market participants have held out hope that the Fed will not have to squeeze the economy much further, especially given the latest October inflation report, published earlier this month, which undershot expectations for the first time in months.
(Source: ft.com)
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