Hawkish or Dovish – New Remarks Following Job Report
After a stellar jobs report, investors and citizens alike were wondering exactly if and how the Fed will react to such signals of economic growth. Fortunately, Federal Reserve Chair Jerome Powell had another chance to address the nation at this week’s Economic Club of Washington, D.C. In a question-and-answer session, Powell was able to provide clearer guidance alongside the recent strides in the labor market, however, it still remains unclear if the Fed will continue to tighten or soften rates. Although he didn’t answer whether knowledge of the jobs report would have changed the Fed’s 25 basis point hike last week, he did reiterate that the process of disinflation will take quite a long time. Powell claimed that the process would be bumpy, and stated that tackling inflation would certainly not be painless.
More interestingly, Powell did seem to hint at more rate hikes, potentially curbing investors’ previous notions that the next raise in March would be the last. Although Powell wasn’t necessarily dovish throughout the event, this didn’t stop bullish investors from pushing markets higher, especially with growing sentiment squandering recessionary fears. Just before Powell’s speech, the U.S. Secretary of the Treasury Janet Yellen claimed she does not forecast a recession in 2023, citing labor market growth and improvements in other sectors.
Regardless, throughout the past twelve months, the Federal Reserve has increased rates by 4.5 percentage points, the steepest expansion in roughly 40 years. With unemployment levels at 53-year lows, the Fed seems content with remaining on course to keep higher interest rates, with a projected estimate of a 4.6% unemployment rate by the end of the year. Although there have been recent economic strides, the continuous, tightened market may show signs of slowing and pain as the nation tries to rid away inflation.
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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.