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Powell surprises with a dovish speech
Fed Chairman Jerome Powell ignored the scenario and delivered a speech stating that he was unlikely to continue his gradual rate hikes next year.
Powell barely mentioned the gradual pace of rate hikes and, when he did, it was generally in the past. At the same time, he said the rates are not on a predefined path and highlighted the incoming economic data.
The US dollar dropped 40 to 70 pips. The S & P 500 is up 40 points from 12 before the speech. US 10-year yields are down 3 basis points to 3.05%.
Powell does not mention energy in his speech, but falling oil prices will reduce inflation and, more importantly, inflation expectations. This allows the Fed time to wait on the impact of rising rates so far.
Here is the key comment in his speech.
"Interest rates remain low by historical standards and they remain
just below the wide range of estimates of which level would
neutral for the economy. "
Compare that with what he said on October 3:
"We can go beyond neutrality, but we are far from neutrality at this point, probably."
Probably not, of course.
ForexLive
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