Fed Chair Powell says smaller interest rate hikes could start in December.
Jerome Powell, chairman of the Federal Reserve, confirmed Wednesday that a smaller rate increase is likely ahead even though he believes progress in the fight against inflation remains limited. In line with the recent comments made by other central bank officials and comments made at the November Federal Reserve meeting, Powell stated that the central bank might soon be able to reduce the size of rate hikes. But he cautioned that monetary policy would likely stay restrictive until real signs of progress emerge on inflation. “Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in remarks delivered at the Brookings Institution.
The chairman noted that policy moves such as interest rate increases and reducing the Fed’s bond holdings generally take time to make their way through the system. “Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added. “The time for moderating the pace of rate increases may come as soon as the December meeting.” Wall Street applauded the remarks. The Dow Jones Industrial Average closed up 737 points, or 2.18%, to snap a three-session losing streak. Tech stocks fared even better, with the Nasdaq Composite roaring 4.41% higher. “The on-the-day equity market surge is in part a relief rally,” wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI. “Many investors feared the Fed chair would take a max hawkish sledgehammer to the recent easing of financial conditions … That overhang has now gone.