(ABM FN-Dow Jones) The Federal Reserve expects inflation to fall significantly in 2023. Federal Reserve Chairman Jerome Powell said this Tuesday during an appearance at The Economic Club in Washington.
Investors were curious to see what tone Powell would take after last Friday’s strong jobs report, which suggests that the US economy is not yet weakening, and that interest rate hikes are therefore doing little to lower inflation. The expectation in the market that the Fed would have done enough to lower interest rates again by the end of the year was therefore dashed.
The message at the Fed’s last interest rate meeting was that the process of disinflation has begun, Powell said. He also reiterated that much of the high inflation now facing central banks and the rest of the economy is related to the coronavirus pandemic and the reopening of the economy.
This would mean that inflation will continue to fall, even if the labor market remains strong.
However, further rate hikes will be appropriate, Powell also said. According to the banker, it is still a long way to bring inflation down to the desired level.
Powell said it was good news that the job market remains strong. In addition, Friday’s jobs report showed that wages are rising slightly less strongly, although still stronger than what would be sustainable for a target level of inflation of 2 percent. The central banker also said it is still possible that the labor market will weaken slightly under the influence of tighter monetary policy.
The US stock market rose shortly after Powell began speaking. The S&P 500 was 0.9 percent higher at 4,146.89 points. Before the performance started, this was a plus of 0.6 percent.
Bron: ABM Financial News
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