Powell’s Precautions – Future Rate Hikes
Following the surprisingly hawkish comments made by Federal Reserve Chair Jerome Powell last week, investors hope confirming signs of disinflation would change the Fed’s mind. This simply wasn’t the case, as despite the larger-than-expected decreases in both consumer and supply-side inflation, the Federal Reserve still believes the heat of the labor and housing markets prove to be enemies in their grand fight. In a testimony to the House Financial Services Committee, Powell expressed his concern over the state of the economy to lawmakers. In his semi-annual appearance, Powell claimed there is a “long way to go” to bring inflation down from its “well above” levels. He believes the current labor market remains too tight to truly decrease monetary movement, as well as other sectors that remain partially insensitive to interest rates.
Despite the hawkish stance, Powell did argue that there were significant signs of loosening in several of these hotter areas. Wage moderation and normal labor force participation figures have aided in cooling inflationary contributions. Powell did reiterate other signs in support of higher rates, such as that the number of jobs remains to outweigh the available labor pool. On the bright side, the Fed Chair did claim that rate decisions are not on a predetermined course, but rather based on monthly figures from meeting to meeting. After the previous struggles of several regional banks, investors can hope the FOMC will certainly tread carefully as they potentially increase rates throughout the end of the year.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
