By Chuck Mikolajczak
NEW YORK (Reuters) - The U.S. economy's strength and continued tight labor markets could warrant further Federal Reserve interest rate increases, Fed Chair Jerome Powell said on Thursday in remarks that appeared to push back against market expectations that the U.S. central bank's rate hikes had reached an end.
Powell said U.S. central bankers are moving carefully on policy now after aggressive rate hikes last year to give time for tighter conditions to slow the economy and inflation.
MARKET REACTION:
STOCKS: The S&P 500 was last up 0.1% in choppy tradeBONDS: The U.S. Treasury 10-year yield moved higher after a brief decline and was last at 4.95%.
FOREX: The dollar index pared declines and was last down 0.45%.
COMMENTS:
JEFFREY ROACH, CHIEF ECONOMIST, LPL FINANCIAL, CHARLOTTE, NC
"The overall theme for the Fed chair was to provide some calm to the markets. There's been a host of Fed speakers all this week, particularly from the Philadelphia Fed chair Patrick Harker, who is very dovish, and really pretty clearly saying that the Fed should be done. So when the Fed chair came today, I think the goal was to provide a little bit of calm for the markets.
"Unfortunately, maybe the markets aren't buying it. The equity markets spiked at the initial release of the text of the speech, and as it went it on, it started to selloff. But now, they are back to where it’s like: maybe this was okay and the Fed is going to hike if there's data suggesting that the economy is growing above trend."
MICHAEL BROWN, MARKET ANALYST, TRADERX, LONDON
"Some decent USD downside seen, perhaps more than one would expect.
"Quite clear that the market is reading into Powell's comments on tighter financial conditions potentially leading to the tightening cycle being done and dusted. Obviously other FOMC officials have said similar, but hearing so 'from the horse's mouth' gives the statement extra credibility."
MICHAEL JAMES, MANAGING DIRECTOR OF EQUITY TRADING AT WEDBUSH SECURITIES IN LOS ANGELES
"I don't think he's un-muddied the waters so much. The tone was a bit more dovish than other Fed officials recently. He addressed recent tightening in financial conditions as significant. He also talked about elevated geopolitical tensions posing risks to global economic activity.
"On the other hand he also didn't remove the higher for longer bias as inflation has not yet come down to a level where the Fed is likely more comfortable.
"It's hard to make too much of a determination about what happens with knee jerk reactions immediately after any type of Fed comments ... There's always going to be traders reacting quickly in both directions so trying to make any type of broad based assumption within 10 minutes of any fed official statements is a touch premature."
CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NC
"Powell continued to leave optionality open for the Fed, in terms of future rate hikes, but did nothing to change the narrative that the Fed will keep rates unchanged at their next meeting and is relatively likely to keep them unchanged for the rest of this year as well (e.g. unchanged in December meeting as well)."
(This story has been corrected to fix a typo from 'are' to 'aren't' in paragraph 6)