Volatility gripped the US stock market after Jerome Powell’s comments did little to change bets of another outsized rate hike during the September Federal Reserve meeting.
he S&P 500 oscillated between gains and losses as the Fed chairman repeated his hawkish views from the Jackson Hole conference in late August, saying officials are strong on their fight against inflation.
The yield on the two-year monetary policy bond jumped seven basis points to 3.5 percent. Swap traders assessed the likelihood that officials will make a 0.75 percent hike on Sept. 21 instead of just 0.5 percent.
Mr Powell said the Federal Reserve will not back down in its efforts to contain inflation “until the job is done”.
“We must now act bluntly and decisively, as we have done so far,” he noted in a remark at the Cato Institute’s monetary policy conference in Washington.
“It is very important that inflation expectations remain anchored,” Mr Powell said, adding that “what we want to achieve is a period of below trend growth” which will result in the labor market returning to better equilibrium .
“The Fed keeps 75 basis points on the table for September and the market doubles on curve inversion,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets. “The Fed’s rhetoric this week has raised the bar on disappointment in August inflation data to cement the odds of a 50 basis point hike.”
Europe’s bonds slid after the European Central Bank announced it would remove a cap on interest on government deposits as it raised rates above 0 percent for the first time in a decade.
That reduces the incentive to shift billions of dollars in public funds from cash to short-term debt, leading to a sell-off that pushed the German two-year bond yield up as much as 21 basis points to 1.31 percent.
https://www.independent.ie/business/world/markets-roil-as-federal-reserve-chair-jerome-powell-hints-at-next-big-hike-41974308.html Markets are in turmoil as Federal Reserve Chair Jerome Powell hints at the next big rate hike