The biggest concern is the tension between inflation and peak employment – Jerome Powell

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The panel in which Federal Reserve Chairman Jerome Powell participated today has officially ended with his final remarks highlighting that his greatest concern is the tension between inflation and maximum employment.

In addition, he said that managing through that process in the next two years is going to be very difficult.

Market implications

Markets are pricing in on the prospect of the Fed starting to withdraw policy support just as global growth is expected to slow in the final quarter of 2021. This makes for a difficult situation, which Powell has expressed as new today.

That said, the dollar rose again on Wednesday to a new 10 1/2 month high against rival currencies, fueled by growing expectations of a reduction in asset purchases from the US Federal Reserve by the end of the year and an interest rate hike, possibly as early as the end of 2022.

This has seen EUR / USD on the verge of a critical break below 1.1600.

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