Fed Chair Jerome Powell Gets Even More Hawkish During Key Speech in Europe
Key takeaways
- Jerome Powell spoke at the ECB Forum on Central Banking this week, which took place at Sintra, Portugal
- He said consecutive rate rises weren’t off the table and that core inflation may not get back down to manageable levels until at least next year
- Undeterred, U.S. stock market futures were up on Thursday morning
June might have been a reprieve in a relentless rate hiking spree from the Fed, but its chair doesn’t want anyone thinking the governing body has grown complacent. New comments from the annual ECB Forum on Central Banking confirmed the Fed is hawkish — and Wall Street shouldn’t expect any let up soon. We’ve got the details below.
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What did Jerome Powell say?
The ECB Forum on Central Banking saw several central banks get together to talk about sticky inflation, which is hampering global growth after the pandemic. Having already doubled down on rate rises, Powell was again hawkish when asked whether the Fed could raise rates every other meeting. “That may work out that way, it may not work out that way — but I wouldn’t take moving consecutive meetings off the table at all,” he said.
Powell wasn’t the only one to talk about hikes — the European Central Bank and Bank of England also confirmed more interest rate rises were on the cards. He also seemed to think core inflation wouldn’t reach the 2% target again this year and that he sees the U.S. “getting there the year after”.
Headline inflation for May came in at 4%, down from April’s 4.9% figure, but improvements in core inflation slowed. It fell to 5.3%, down from 5.5% in April, indicating the U.S. economy is facing a crucial tipping point if it’s to beat inflation once and for all.
What was the market reaction?
Typical to what’s played out over the last year and a half, the markets retained their optimism. U.S. stock futures rose on Thursday morning, with the Dow Jones futures up 0.3%, the S&P 500 futures hitting 0.3% and the Nasdaq climbing 0.4%.
The CME FedWatch tool has a quarter-point rate increase at the next Fed meeting in July at 82%, up from 75% a week ago. Powell is expected to speak again today in Madrid, so things might change.
The bottom line
The Fed is playing it safe with hawkish comments on inflation because it can’t risk undoing all the hard work it’s put in to get where we are today. Despite everything, Wall Street’s rampant optimism — or burying its head in the sand — means the stock market isn’t declining yet.
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