Weekly Market Review: Powell Seen As More Hawkish Than Expected
The most important moments for gold this week have now come and gone. In a speech earlier today, Fed Chairman Jerome Powell struck a surprisingly hawkish tone. He said the central bank will stay with its restrictive policy stance for some time while reiterating the central bank’s goal of bringing inflation back down to the 2% target.
Has Powell Backed The Fed Into A Corner?
Not only did Powell suggest the Fed would keep policy tight for some time, he also warned against the risks of loosening policy prematurely. Powell acknowledged that rising interest rates are slowing growth. He added, however, that those risks are outweighed by inflation.FRee Gold Kit https://bit.ly/3BQhLLp
If the Fed was in a corner before, it is now really in a corner. Seemingly suggesting the Fed will continue to hike rates aggressively, the Fed may now be forced to do exactly that, regardless of the economic consequences. Should the Fed at some point elect to reverse course now, it could lose any remaining credibility it has within the market.
Powell acknowledged the pain that rising rates can cause to households and businesses. He suggested that inflation would be a worse pain, however, and that without price stability the economy does not work for anyone.
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