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Fed’s Powell floats ‘temporary’ label for inflation

FILE PHOTO: Federal Reserve building in Washington, DC
FILE PHOTO: The Federal Reserve Building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

November 30, 2021

(Reuters) – U.S. Federal Reserve Chairman Jerome Powell on Tuesday said the word “transient” is no longer the most accurate term to describe the nature of today’s high inflation rates.

“Perhaps this is the right time to pull back from that,” Powell said in response to a question about how often he uses the word to describe how long high inflation is expected to last in testimony before the commission. Senate Banking Committee.

Powell also said it would be appropriate for the central bank to consider a faster package of “reducing” large-scale bond purchases based on the strength of the economy and high inflation rates.

Story:

STOCKS: S&P 500 Index extends lower and last falls 1.5%

BOND: Yields on 10-year US Treasuries rose post-declaration to 1.4562%; Yield in 2 seconds increased to 0.5433%

FOREX: US Dollar Index up 0.04%

COMMENT:

BEN JEFFERY, RATE STRATEGY, BMO CAPITAL MARKET, NEW YORK

“Powell was more hawkish than many assumed with variant risk. He said now is the time to dismiss the transitory character of inflation and said maybe a conversation about cutting earlier than previously assumed might be appropriate. “

“The fact that (US Treasuries) yields on the curve move higher, led by the UI and belly, speaks to the sort of assumption that a more positive normalization could be a little earlier than with previous expectations.”

“The market reading that the cut is an earlier end could imply an earlier rate hike. But he didn’t say anything specific regarding that. “

DAVID CARTER, HEAD OF INVESTMENT, WEALTH LENOX CONSULTANCY, NEW YORK

“The market will likely interpret Powell’s comments that the Fed is likely to set the stage for more drastic rate cuts and hikes. So far, the Fed has not given specific information as it relates to the time of ‘too hot for too long’. “

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENT, FAMILY INVESTMENT OFFICE IN NEW VERNON, NEW JERSEY

“The most important thing he said to the market is that the inflation threat is growing and inflationary pressures are high.”

“Up until now he has insisted inflation is temporary… Now he seems to be indicating that there are more concerns. The assumption is that they will move faster with tightening and ending the easing cycle that has dominated the market for the past decade. They will likely be quicker to raise interest rates and reduce bond purchases. “

“The Fed has a view of making moderate moves and informing the market. They probably won’t change things dramatically,” he said.

“For fundamental investors, I don’t think there’s anything that wakes them up and says I have to do something significantly different.”

“You also have a significant bull market and keep going up even when the news starts to drop a little bit more. Just a little bit, a little bit of wind was brought out quickly. A little pop up. ”

DAVID KEATOR, PARTNER, THE KEATOR GROUP, LENOX, MASSACHUSETTS

“Markets are reacting to COVID news more than inflation news. The market has strong faith in the Fed and the Fed has done a great job of informing how it handles inflation. They are a bit constrained but handle it well. This is a normal cycle that we are seeing in the market. We just have to wait this out a bit.

“(Inflation will slow the economy and that will hurt earnings but we are continuing to stay open and I’m not worried about that yet. Wage inflation continues to persist but the problem is there,’” supply chains will resolve on their own and we will start to see commodity prices fall.Wage inflation will become more severe.

“(Omicron variant) is the excuse. The markets had a pretty active session and it’s time to take a breather. Whatever may have been the tipping point. “

ART HOGAN, MARKET STRATEGY MATERIAL IN NATIONAL SECURITIES IN THE NEW YEAR

“What the variant has done may have dampened talk of accelerating the rate of decline, and that’s probably reasonable. The Fed is not locked into anything. If we do see a significant drag on economic activity due to this new variant – which is not clear yet – but if it becomes apparent it could certainly alter their plans. . ”

“Right now there is some expectation that we will hear a more dovish Federal Reserve, but it is not, we are hearing a more hawkish Fed, but not as hawkish as people are. are betting that they will raise rates sooner next year. ”

“Retirement from ‘temporary’ can mean an overly vague term, and all that comes along is temporary retirement because many people think that temporary is a few months, and obviously temporary means a few out of four quarters. ”

(Collected by Global Financial and Market Breakthrough News)

Source link Fed’s Powell floats ‘temporary’ label for inflation

Bobby Allyn

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