Markets trying to judge level of Powell's optimism


Markets trying to judge level of Powell's optimism

"We still expect the Fed to continue to hike interest rates, as economic growth is doing quite well in the United States and fiscal stimulus should help to boost growth further", said Capital Economics analyst Simona Gambarini.

The Federal Reserve Chairman was careful not to offer suggestions on fiscal policy.

"Powell had plenty of opportunities to adopt more of a wait-and-see approach", Porcelli said.

Financial markets barely batted an eye on Tuesday when Jerome Powell's first public statement as Federal Reserve chief saw daylight, interpreting it as a steady-handed commitment to the USA central bank's policy of gradual interest rate increases.

"There is no evidence the economy is overheating", Powell told the Senate Banking Committee in his second appearance in Congress this week.

The economy grew at a 3 per cent annual pace over the second half of a year ago, and it is about to receive additional stimulus from tax cuts and higher federal spending approved by Congress in recent months. He said that monthly job gains averaged 179,000 from July through December, and that payrolls rose an additional 200,000 in January. The buyout offer is for 22.1 billion pounds ($29.5 billion), and Comcast's Class A shares lost $2.92, or 7.4 percent, to $36.66.

Powell says that he believed the labor market can strengthen further without causing an acceleration in inflation. It had earlier touched its highest since January 19 at 90.744. African Americans and Hispanics (at or below pre-recession rates). Bank of Japan's policy board member Goushi Kataoka called for more easing efforts, aiming to hit the central bank's 2 percent inflation target.

The Dow was down by 380 points Wednesday in volatile trading, with markets falling sharply towards the close of trading.

Properly defined, inflation is an increase in the money supply, with price increases being the natural inevitable result as each piece of currency becomes less valuable over time.

As expected, Powell also indicated that the Fed will loosen some of the limits on the activity of banks-an issue that has been pushed by Wall Street-with one of the changes allowing them to reduce their capital requirements, thereby enabling large banks to increase their holdings of borrowed money.

The U.K.'s FTSE 100 Index fell 0.9 percent. The dominant fear for the month was the threat of higher inflation and interest rates, and February was the worst month for the US market in two years.

Before Powell's testimony, investors had seen the Fed as likely to wait until December before raising rates a third time, if indeed it chose to do so at all. Ms Yellen managed to raise interest rates and reduce the Fed's balance sheet, while encouraging broader economic growth. "You saw some reaction, but not a dramatic one".

Is a hawk or a dove now running the Fed?

Concerns over a possible wages push were also expressed in a Fed report released in conjunction with Powell's testimony. That could force faster rate increases which could trigger another recession, hurting the most vulnerable segments the most.

The Federal Reserve Chairman spoke little of the number of rates hikes expected this year. The momentum has not yet slowed, with the market on the lookout for more signals from him for a possible fourth rate hike.



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