S&P 500 Gains Following Powell’s Speech

After Jerome Powell, Fed Chair declared that monetary policymakers will proceed carefully in making interest rate decisions, Wall Street is hoping for its first profitable week in four weeks. The Nasdaq composite and Dow Jones Industrial Average both increased by 0.9% in late trade, while the S&P 500 increased by 0.8%.

Powell’s address, which was eagerly anticipated, emphasized that decisions about interest rates will be made in light of new data on inflation and the state of the economy. Wall Street had Powell’s speech marked on their calendars in the hopes that he will stop raising interest rates, which not only slow down inflation but also the economy and depress investment values.

Jerome Powell, the chair of the Fed, stated that the US central bank will ‘proceed carefully’ with any additional rate increases. In addition, Powell said that the impacts of earlier interest rate rises have not yet fully rippled through the economy, suggesting the central bank may decide to maintain rates stable for the time being.

In essence, Powell does not intend to raise key interest rates; instead, he will wait for inflation to wane to the Fed’s goal inflation rate of 2% before lowering key interest rates and this was a dovish speech in the judgement of some analysts.

Over the coming months and into the following year, one to three more hikes may be mae before they are put on hold for a while and only reduced when broader macroeconomic conditions weaken and a shallow recession results.

Powell gave the dovish side some cause for optimism by admitting that the current course of action is constrained but that it may develop over time. He did, however, also issue a threat to reapply the hammer if the job market and economy became overheated.

As more data begins to come in early next month and next week, this will keep markets on edge. We’ll be moving from number to number during our stay. Powell warned that the US economy had not yet totally slowed down as a justification for keeping interest rates unchanged for the time being.