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Powell Says Rate Spike 'Notable,' but Fed to Stick With Status Quo

Economy Mar 04, 2021 01:46PM ET
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By Yasin Ebrahim

Investing.com - Federal Reserve Chairman Jerome Powell said Thursday, the recent spike in U.S. rates was "notable" but stressed the central bank would continue the current pace of bond buying and low-level interest environment until substantial progress is made on its job creation and inflation goals.    

The U.S. United States 10-Year Treasury jumped above 1.5%, while the United States 30-Year rose to a more than one-year high.  The S&P 500 fell 1.58%, the Dow Jones Industrial Average fell 1.28%, or 399 points, and the Nasdaq Composite fell 2.3%. 

Powell said the pace of the increase in rates last week "was something that was notable and caught my attention,"  but suggested the central bank is unlikely to step up its pace of bond buying. "For asset purchases, they'll continue at least at the current level, until we achieve substantial further progress toward our goals. That's actual progress, not forecast progress," he added.

"There's good reason to think we'll begin to make more progress. But even if it happens, it's likely to take some time to achieve substantial further progress, or interest rates to raise interest rates above zero."

The surge in rates has been attributed by some to a glut in the supply of bonds amid expansionary monetary policy and multi-trillion dollar fiscal packages.  

"What happened with rates is pretty simple: supply and demand. We've printed so much money and issued so much debt that finding buyers for that debt is more challenging perhaps than maybe people thought,"  Sean O'Hara, president of Pacer ETFs, said in a recent interview with Investing.com.

If the pace of increasing rates continues, then the Fed will likely step up its bond buying purchases, while the next round of stimulus could also prompt buying from states, keeping a lid on rates. 

"I think the Fed will act and, perhaps be a little more aggressive on their bond buying, O'Hara added. If the $1.9 trillion stimulus package passes, a lot of the money is "going to be transferred from the federal government to state governments, [who in turn] are likely to buy bonds," helping to stem the supply-demand imbalance.

Powell also downplayed the worries about a pick up in inflation, reiterating that any post-pandemic surge in prices is unlikely to be sustainable. "What happens in the next year or so is going to amount to prices moving up but not staying up, certainly not staying up to the point where they would move inflation expectations materially above 2%."

In the event that inflation or conditions "change materially, we'll be prepared to use our tools in whatever way is appropriate at that time to foster the achievement of our goals," the central bank chairman said.

Powell Says Rate Spike 'Notable,' but Fed to Stick With Status Quo
 

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Comments (36)
Viking Fire
Viking Fire Mar 05, 2021 3:20AM ET
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I thought crypto was suppose to be the volitile one lol. Next time you say that think of today.
Christopher Leeson
Christopher Leeson Mar 05, 2021 12:15AM ET
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The rise in oil is the last nail in the coffin for the world economy. No amount of Fed. tinkering is going to stop the Tsunami of debt heading our way. Hope that helps.
Stratus Angelacus
Stratus Angelacus Mar 04, 2021 4:40PM ET
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He talks of next year already. With no certainty but hope. Put a pillow on your seat. A bumpy road ahead on the wagon route.
mushaf munas
mushaf munas Mar 04, 2021 4:30PM ET
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in a bull market corrections and sell off happens and it's healthy. buy the dip and hold tight..
Patron Silver
Patron Silver Mar 04, 2021 3:56PM ET
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impeach McConnell
Stacy Starner
Stacy Starner Mar 04, 2021 3:56PM ET
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All the dems nasdaq negative for the year good job
Connecticut Yankee
A_Jaundiced_Eye Mar 04, 2021 3:40PM ET
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Wait a second.  The guy they're talking about is Jerry Powell?  I thought he was Jerry Springer. Jerry! Jerry! Jerry!
Phil Ht
Phil Ht Mar 04, 2021 3:32PM ET
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Market posion
Mitchel Pioneer
Mitchel Pioneer Mar 04, 2021 2:52PM ET
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400 points in loss vanish into thin air.  Remarkable how "rallies" don't give up their "gains," bur rather walk a tightrope into the close.  Welcome to the US Ponzi Scheme, biggest investment joke in the world.
Connecticut Yankee
A_Jaundiced_Eye Mar 04, 2021 2:52PM ET
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"... US Ponzi Scheme, biggest investment joke in the world."  Second biggest; Social Security is #1.
Mike Brarey
Mike Brarey Mar 04, 2021 2:46PM ET
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Why Powell speaks up on every down day? Being a market pacifier is a Fed mandate now?
la popeye
la popeye Mar 04, 2021 2:45PM ET
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Sean O'Hara, president of Pacer ETFs, said in a recent interview with Investing.com.nail it. who want tb of a sinking boat. crash ahead. a serious one.
 
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