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

EconomyMar 04, 2021 01:46PM ET
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© Reuters.

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.
Mitchel Pioneer
Mitchel Pioneer Mar 04, 2021 2:45PM ET
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2PM sharp, and the fraud unfolds with the predictability of the setting sun.  More losses whisked out of the system, as the greatest investment fraud continues to defraud America in broad daylight. Assume the proper position for the criminal late day recovery.
Pedro David Jr
Pedro David Jr Mar 04, 2021 2:39PM ET
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how can u tell if a speech is good or bad. im not into this yet. if someone could explain or suggest website to check or something i appreciate
Jack Sharma
Jack007 Mar 04, 2021 2:10PM ET
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Powell took heavy shorts positions today. lol
Meself Meself
Meself Meself Mar 04, 2021 2:10PM ET
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sold before he came back out went long lol
Shree Management
Shree Management Mar 04, 2021 1:59PM ET
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y market gone down ?
Shree Management
Shree Management Mar 04, 2021 1:59PM ET
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what impact on market ?
Derick Guo
Derick Guo Mar 04, 2021 1:56PM ET
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Whats is going on keep pass out the money? It will only make people kore and more lazy and dont want to work. Powell is doing a non sense move.
Akshat the Muse Maker
Akshat the Muse Maker Mar 04, 2021 1:51PM ET
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free fall...take this as opportunity to buy on dip
Orazio Lubas
Orazio Lubas Mar 04, 2021 1:28PM ET
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The issue is not Powell. The issue is the perception of the people. Everybody thinks that you can't print trillions of dollars and have no inflation. Powell repeats himself over and over again: there is no inflation right now - and the US economy urgently needs inflation. Will the inflation hit? Won't it? Will it be too high? Will it be too low? Nobody knows - but also, nobody trusts Powell right now when he says that all the trillions printing does not cause (enough) inflation...
Dani Vain
Dani Vain Mar 04, 2021 1:28PM ET
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When Powell said that he will use all tools available last year, nobody believed too... Until now he delevered.
Eduardo Salido
Eduardo Salido Mar 04, 2021 1:28PM ET
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it's not Inflation or Powell the problem. the problem are the sheep/trend. Sheep follow. It goes like a domino effect. Good thing is that Greed exists and the Market will go up again. Right now people are just reacting to others selling.
Suyog Subhash
Suyog Subhash Mar 04, 2021 1:27PM ET
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down down down all down,gold 1580/1520dow jones -3000 points from heresgx nifty will 13500/13000only bond will up
Daniel Park
Daniel Park Mar 04, 2021 1:24PM ET
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J.Powel's last unnecessary comment drives nervous market in panic but it didn't look to be intended.
Ejumeriona Collins
Ejumeriona Collins Mar 04, 2021 1:24PM ET
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If it isn't intended, market shouldn't be responding like this. The speech has been anticipated for days
Ejumeriona Collins
Ejumeriona Collins Mar 04, 2021 1:20PM ET
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It has been a crazy 2 hours indeed, terrible fall
Doitch Caso
Doitch Caso Mar 04, 2021 1:18PM ET
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Down goes Frazier! JPow gonna be singing a different tune come 2% - 3% on the 10yr... somebody gonna be crying uncle, and something tells me it ain’t gonna be the bond market... lol
Hassan Salloum
Hassan Salloum Mar 04, 2021 1:17PM ET
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So he see no problem with long term rate spikes? Really?
Doitch Caso
Doitch Caso Mar 04, 2021 1:17PM ET
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of course he does, he can’t cop up to it though... not yet but soon!
Jacob Steinschlag
Jacob Steinschlag Mar 04, 2021 1:17PM ET
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actually bond yields are overrated. They've been much higher before the pandemic and stocks were valued almost as high if you account for the money supply inflation of 25%
Akshat the Muse Maker
Akshat the Muse Maker Mar 04, 2021 1:16PM ET
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dow lose 400 points
Akshat the Muse Maker
Akshat the Muse Maker Mar 04, 2021 1:13PM ET
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we have to be ready for another crash??
Victor Menken
Victor Menken Mar 04, 2021 1:13PM ET
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There is no reason for crash yet
Mircea Bogdan Alda
Mircea Bogdan Alda Mar 04, 2021 1:13PM ET
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Every day you should be prepared🤣
Akshat the Muse Maker
Akshat the Muse Maker Mar 04, 2021 1:13PM ET
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Victor Menken : Are u sure
sandeep varma
sandeep varma Mar 04, 2021 1:13PM ET
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srry ur puts not gone rise ...dow will recover
 
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