Powell Takes The Floor
In front of a packed Congress, Fed Chair Jerome Powell skipped from market-moving topic to market-moving topic, investors furiously taking notes of what he said. His testimony, a rare insight into his mind, comes at a rickety time in the markets. Here are the minutes!
As the Federal Reserve frontman, Jerome Powell has one main lever in front of him, and it’s called the interest rate. In changing that, he holds the reins of the economy, either loosening or tightening the money supply to American businesses. Companies on the stock market usually can’t go upwards and to the right without a low-rate boot from the Fed, but too low, and things can get messy!
Summoned to give an update on the lever situation, Powell kicked off the event with a pre-written speech. He reiterated his task to pull and push that lever to keep our stock market boom going, and when it came to his most rehearsed line, he didn’t mince his words. Powell admitted that lower interest rates could be incoming, but he was careful not to commit, leaving many investors wondering how much closer we can get to rate cuts without actually getting them!
From then on, the market hung on every word. Powell shrugged off suggestions of quitting under Presidential pressure, pulling Facebook’s digital Libra currency, and a throwback to using the gold standard. But as ever, he kept his cards close to his chest. One look at the Fed Funds futures market, where people bet on rate movements, shows what investors think of the whole thing. Record highs in stocks are founded on a very firm belief that rates are on their way down. They better be, or otherwise it could be the markets…
In sum, Powell can read every macroeconomic signal out there. However, after yesterday’s testimony, can investors read his?!