Federal Reserve Chair Jerome Powell indicated a possible halt in interest rate hikes during his address at the Economic Club of New York Thursday. The potential pause, hinted for the Federal Open Market Committee (FOMC) meeting on November 1, is attributed to policy uncertainties and escalating geopolitical risks.
Powell left room for an anticipated policy shift in December or later, which would be contingent upon incoming data and the evolving economic outlook. He emphasized that higher long-term yields, influenced by unsustainable government budget deficits, could lessen the need for further Fed hikes.
Inflation remains a concern as it's still above the Fed's 2% target. Powell recognized these strides but cautioned that it's premature to forecast its return to this benchmark. He also noted a moderation in the labor market, with wage growth gradually aligning with inflation objectives.
The market response to Powell's speech was mixed. This was evidenced by S&P 500 volatility and falling Treasury two-year yields, while longer-term maturities rose. Powell's comments indicate a cautious approach by the Fed amid uncertain economic conditions and underline the central bank's commitment to data-driven decision-making.
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