In an hour-long session of prepared remarks and questions at the Brookings Institution think tank — his last scheduled appearance before the central bank’s next meeting in two weeks — Mr. Powell gave a short-term message that sent markets soaring: The Fed was “slowing down” from the breakneck pace of three-quarter percentage point rate hikes that have prevailed since June, and would feel the way towards the peak interest rate needed to slow inflation to the Fed’s 2% target.
Combined the remarks showed the Fed grappling with some of the longer-term trends that were amplified by the pandemic, particularly the demographic drag that an aging population, COVID-era retirements, and weak immigration are having on the labor force. Those sorts of structural concerns have been in the background of Fed debate since the early days of the pandemic, but are moving to the fore.
The benchmark S&P 500 index shot into positive territory and closed 3.09% higher, and bond yields, which move in the opposite direction to their prices, all tumbled. The yield on the 2-year Treasury note, the maturity most sensitive to Fed rate expectations, dropped to about 4.37% from 4.52%. The dollar weakened against a basket of major trading partners’ currencies.
Source: Loan Digest (loandigest.net)
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