- Wall Street continues to bleed after Powell’s speech.
- The S&P 500 sets new lows for the day.
stocks on wall street trades lower in the American session following comments by Federal Reserve Chairman Jerome Powell in a speech at the central banking conference in Jackson Hole, Wyoming. He suggested that the central bank will keep raising interest rates to control inflation. The US economy will need tight monetary policy “for some time” before inflation is brought under control, he said.
The Fed is clearly data-dependent and Powell said that although the US economy is slowing, he maintains that it still has strong underlying momentum. For example, and crucially, Powell explained that while “lower July inflation readings are ‘welcome,'” they are “far from what will be needed before we are confident that inflation is coming down.”
Investors were looking for clues as to whether the Fed was happy with the less inflationary results of the latest data, but Powell’s speech shows little concrete evidence of that. In fact, he was focused on not loosening the policy too soon, but he didn’t mention going further on the hawks’ side.
He said that “as policy tightens further, it will be appropriate to stop the pace of rate hikes at some point”, however that is somewhere on the horizon. Instead, it argues that “restoring price stability is likely to require continued tightening for “some time”. As a result, Fed funds futures show that the odds of a 75 basis point rise in September they are now 56.5%, up from 46.5% before Powell’s speech.
From the moments before Powell’s remarks were released at 1000 EDT to now, the S&P 500 had fallen about 1.5%. Before the president’s statements, the index was more or less flat. The index is down 1.9% and has posted a new low on the day: 4,106.45.
Meanwhile, earlier data showed US consumer spending barely rose in July, but inflation eased sharply, another piece of data that could give the Federal Reserve room to scale back its aggressive rate hikes.
Technical levels
Source: Fx Street
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