top of page
  • Writer's pictureRealFacts Editorial Team

Jerome Powell Eases Fears of Rate Hikes

person pointing to a screen with a graph on it

On Wednesday afternoon the Federal Reserve announced its decision to maintain its benchmark rate unchanged. This suggests that consumers may not experience any immediate relief from elevated borrowing expenses. Despite keeping rates unchanged, Jerome Powell, the chair of the Federal Reserve, effectively dismissed the notion of the Fed adopting a more hawkish stance. A hawkish Fed indicates that its policymakers are inclined towards tighter monetary policy. This typically entails raising interest rates or reducing monetary stimulus to control inflation or prevent the economy from overheating. Powell suggested that the next action from the Federal Reserve is unlikely to be a rate hike. He said, “It's unlikely that the next policy rate move is going to be a hike…our policy focus is really just how long to keep policy restrictive.” When Powell made these remarks, the market initially surged by over a percent, but later pared those gains and ended the day at neutral levels.

The primary reason why many investors anticipated a more hawkish tone from the Fed at this meeting was due to the persistently high inflation seen in recent months. Vidya Ramakrishnan, an author for Investor's Business Daily, documented Powell's response to this issue. She wrote, “Powell remarked that "data has not given the greater confidence" needed for rate cuts since "readings on inflation have come in higher than expected."... The Fed also said that the original plan for three rate cuts will take longer. Powell also said stagflation was unlikely.” These comments alleviated many investors' concerns, yet uncertainty remains regarding the timing or likelihood of future rate cuts.

The data-dependent Federal Reserve did take a notable action by announcing a decision to reduce the pace of unwinding debt securities from its balance sheet. Starting in June, the Fed will decrease this pace from $95 billion per month to $60 billion, marking a shift toward monetary easing. This adjustment in quantitative tightening indicates a more dovish stance or, at the very least, a less hawkish approach. Investors should remain vigilant and monitor the Federal Reserve's future actions regarding interest rates, as these decisions can have a significant impact on the many public companies that constitute the market.

0 views0 comments


bottom of page