What You Should Know About The Fed’s Latest Move: Jerome Powell’s Perspective and the Return of Bond Bulls

The Federal Reserve announced on Wednesday that it will maintain its benchmark interest rates in the range of 5.25% to 5.5%, which was expected by the market. Fed Chair Jerome Powell acknowledged that the current restrictive monetary policy is causing inflation to decrease, but he noted that there is still a long way to go before reaching the Fed’s target of 2% inflation. Powell emphasized that the Federal Open Market Committee is not yet confident that the policy stance is sufficiently restrictive and will continue to assess the situation on a meeting-by-meeting basis. He also mentioned that strong economic indicators could require further tightening of monetary policy in the future. Powell discussed the impact of persistent changes in financial conditions, such as the strength of the U.S. dollar and the level of Treasury yields. He dismissed speculation about potential rate cuts and stated that the committee is not considering such a move. Powell did not provide a clear decision on a rate hike in December, stating that more inflation and labor market readings are needed. He also mentioned the elevated global geopolitical tensions but stated that it is unclear if they will have an economic impact on the United States. Powell’s comments led to a decline in U.S. Treasury yields and a weakening of the dollar, while stocks experienced a surge during his press conference.