US Fed Rate Hike: Chair Powell’s commentary is crucial | The Financial Express

US Fed Rate Hike: Chair Powell’s commentary is crucial

Stock markets will rocket if the Federal Reserve signals it will slow down its rate-hiking agenda during Wednesday’s policy meeting.

US Fed Rate Hike: Chair Powell’s commentary is crucial
US Fed Chair Powell's commentary after US Job openings jump in September is crucial.

Ahead of the Fed policy decision, markets are on the cautious side. Investors anticipate closely examining the Fed Chair’s remarks to detect any cues about Fed’s aggressive policy on rate hikes. Nigel Green, CEO, deVere Group, one of the world’s largest independent financial advisory, asset management, and fintech organizations is, however, clear about the way the market may react. “Stock markets will rocket if the Federal Reserve signals it will slow down its rate-hiking agenda during Wednesday’s policy meeting,” says Green.

The FOMC meeting in November is expected to result in the fourth consecutive rate hike of 75 bps increase from the Fed. There won’t be a revision to the statement of economic projections, but the market will be watching for any hints from Chair Jerome Powell’s press conference about the prospects for growth and inflation in the hopes of a lesser 50 bps increase in December.

“Investors will be listening carefully to the words and tone. It’s not so much about the percentage points now. Much more important is what is said, how it is said, and how it is perceived. We expect the Chair Jerome Powell to sound hawkish as he reasserts the Fed’s vow to fight still stubbornly hot inflation. Whilst this would normally create jitters in stock markets and push bond yields higher, it might not happen this time,” adds Green.

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Nigel Green continues: “This is because we also expect the Fed will signal it will slow down its rate-hiking pace before winding it down in, possibly in March. This prospect will excite stock markets.

US Fed wants to slow down the pace of new job openings. Rate hikes by US Fed is in that direction as it knows more new jobs will fuel inflation. Therefore, bad news for the economy is good news for the Federal Reserve as it will help it to tame inflation. However, the picture on the ground is a bit different. The U.S. Bureau of Labor Statistics released the latest data showing US job postings unexpectedly increased in September.

According to the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, there were 10.7 million open positions in September, up from a revised 10.3 million a month earlier.

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What it means is that there will be more wage increases thus increasing pressure on the Federal Reserve to continue its vigorous battle to fight inflation. More job opportunities than anticipated are a sign of a healthy labour market. According to a former US Treasury Secretary, the Fed should stick to its rate hike strategy in order to avoid sending any confusing signals. Numerous macroeconomic data points in the US suggested a resurgence.

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First published on: 02-11-2022 at 16:32 IST