Powell’s statements on inflation gave Wall Street a boost

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Wall Street indexes gained ground on Tuesday, with the technology Nasdaq starring in the rise, with investors appearing satisfied that today’s speech by Federal Reserve Chairman Jerome Powell to Congress did not come as much of a surprise.

Instead, the head of the Fed tried to reassure the markets that the exit of the central bank from the era of zero interest rates will be done carefully so as not to hit the US economy.

Powell reiterated his commitment today to use all the tools at his disposal to deal with the price rally, stressing that the US Federal Reserve will not allow high inflation to continue. “If we have to raise interest rates more over time, we will do it,” he told a Senate committee at a hearing to confirm his second term at the helm of the central bank.

The Fed chairman estimated that high inflation would last “until the middle of the year”, adding that if inflation persists at higher levels than expected, the Fed should raise interest rates further. He also said that the central bank may decide to start shrinking its balance sheet this year.

At the same time, Powell tried to reassure the markets that the central bank would be careful not to derail the economic recovery or cause damage to the labor market. “Now is the time to start moving from the pandemic emergency to a more normal level,” Powell said. “However, this should not have a negative impact on employment,” he added.

Indicators – Statistics

On the board, the Dow Jones industrial average gained 183.15 points or 0.51% and closed at 36,252.02 points, while the broader S&P 500 strengthened by 42.78 points or 0.92% to 4,713.07 points after five consecutive negative meetings.

The technology Nasdaq added 210.62 points or 1.41% and climbed to 15,153.45 points.

Of the 30 stocks that make up the Dow Jones industrial average, 19 closed with a positive sign and 11 with a negative. The biggest gains were made by Boeing with gains of $ 6.71 or 3.21% at $ 216.02, followed by Chevron at $ 127.97 with gains of 2.29% and Salesforce.com at $ 234.84 with an increase of 2.27%.

The three stocks with the biggest losses were IBM (-1.60%), Procter & Gamble (-1.16%) and Johnson & Johnson (-1.06%).

Against the backdrop of the inflation rally and estimates for a strong response from the Fed, the 10-year US yield climbed to its highest level on Monday, January 17, 2020. Since the beginning of the year, the 10-year yield has gained a total of 28 points base.

Meanwhile, the president of the Fed Bank of Kansas City, Esther George, stated that she is in favor of reducing the Fed balance sheet, which now reaches $ 8.77 trillion. early in the process of normalizing monetary policy.

For his part, Raphael Bostic, chairman of the Federal Reserve Bank of Atlanta, said central bank officials may have to raise interest rates as early as March and begin lowering the Fed balance sheet “relatively soon” after raising interest rates to curb inflation.

Finally, Loretta Mester, head of the Federal Reserve Bank of Cleveland, said today that she sees three increases in US interest rates in 2022, starting in March.

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