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Jerome Powell’s Surprisingly Hawkish Comments Upend Markets

Published 12/01/2021, 12:08 AM
Updated 07/09/2023, 06:31 AM

Ostensibly called to testify on the current state of the CARES Act to the Senate Banking Committee, yesterday, Fed Chairman Jerome Powell relayed some potentially massive comments about the FOMC’s monetary policy (emphasis mine):

  • TIME TO RETIRE THE WORD ‘TRANSITORY’ REGARDING INFLATION, ‘TRANSITORY' MEANS NOT LEAVING PERMANENT MARK ON PRICES
  • THE THREAT OF HIGHER, MORE PERSISTENT INFLATION HAS GROWN
  • RISK OF HIGH INFLATION IS A RISK TO GETTING BACK TO FULL EMPLOYMENT
  • EXPECT HIGH INFLATION THROUGH MIDDLE OF NEXT YEAR
  • CAN CONSIDER WRAPPING UP TAPER A FEW MONTHS SOONER
  • WILL TALK ABOUT SPEEDING UP TAPER AT COMING FED MEETING
  • FOR NOW OMICRON IS A RISK, NOT BAKED INTO FORECASTS

Reading between the lines, it appears that Chairman Powell has grown dramatically more concerned with the risk of sustained inflation, and is therefore looking to end the central bank’s asset purchases sooner than initially outlined.

Market reaction

We’ll have a more upcoming, but Powell’s comments sent a tempest through major markets. US indices, fearing the accelerated end of the easy money train, tested their lowest levels of the month while the yield on the benchmark 10-year Treasury bond spiked 6bps off its intraday lows to 1.47%.

Gold shed a quick 30 points to trade back near $1775 and WTI crude oil lost 4.5% on the day. In FX land, the US dollar surged nearly 100 pips from its intraday lows and is once again trading higher against its major rivals on the week.

Original Post

Latest comments

as long as government spending stays the same or increases, they can never increase rates.
The truth is the Fed can only roll the bank held treasuries one more time because inflation will force up yields and banks wont buy up more without higher yields …dead end to print or they would scew the poor over to do it
Dr. Jerome Bubble has likely got mild to severe diarrhea, he will deliver big lumpy chunky droppings in stocks like loose watery movements that will flush out most of the rally, according to Fibonacci 0.612 from the recent alll time top.
Upend markets? Have you looked at$NQ after hours !!
Oh god!! The maybe end of free money !!!
Only a loon would want to pay higher interest
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