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- Fed Chair Jerome Powell provided a forceful defense of the central bank’s monetary policy in the era of Covid-19 in what could be his final address as chairman of the Federal Reserve while noting that the rate of asset purchases could slow by the end of 2021
- Jerome Powell’s ultra-dovish speech has equities markets establishing new all-time highs, said Cliff Hodge, chief investment officer at Cornerstone Wealth. Here are three key conclusions from Powell’s speech in the long run
- Powell made it plain in his address that he and the Fed will continue to debate when it would be prudent to cut bond purchases, based on how the economy performs in the fall
Fed Chair Jerome Powell provided a forceful defense of the central bank’s monetary policy in the era of Covid-19 in what could be his final address as chairman of the Federal Reserve while noting that the rate of asset purchases could slow by the end of 2021.
Powell’s speech at the Jackson Hole Economic Policy Symposium, which lasted approximately 30 minutes, was televised. The Kansas City Federal Reserve, which organizes the annual conference, was compelled to adjust its plans on short notice and hold a virtual event due to the growth of the delta variation.
The Fed’s current uncertain climate is exacerbated by the last-minute change. Powell reaffirmed his commitment to easy money in his speech, while the country recovers from the new coronavirus. His remarks immediately boosted stock indexes and drove the value of the US dollar against other currencies lower.
Jerome Powell’s ultra-dovish speech has equities markets establishing new all-time highs, said Cliff Hodge, chief investment officer at Cornerstone Wealth.
Here are three key conclusions from Powell’s speech in the long run. Powell hinted at a reduction in the Fed’s asset purchases, which have been in place since the start of the Coronavirus outbreak when speaking at the virtual Jackson Hole annual symposium.
The step, known as tapering, could happen this year, but Powell did not specify a clear start date. Their elevated holdings of longer-term securities will continue to sustain accommodating financial conditions even after our asset purchases finish, he said.
The timing and speed of financial asset purchase reductions will not be meant to carry a direct signal about the timeframe of interest rate lift-off, for which a new and far more severe test has been established.
With Powell’s statements, the Fed spared index losses by reducing asset purchases, which would certainly take the wind out of the stock markets’ sails. Following the speech, the S& P 500 reached new all-time highs.
At the same time, the US dollar dropped, while Bitcoin surged to new highs on Bitstamp, over $48,400. Traders and analysts were unanimous in their optimism.
Put on the rally hat, futures have expired, and bitcoin is on the rise, Scott Melker said, noting that the $2 billion end-of-month open interest expiry has ended. Powell’s tone, meanwhile, was regarded as ultra dovish by popular Twitter trader Ryan Cantering Clark, who supported long positions.
For all of this year, the focus on the Fed has been on when it will begin buying fewer bonds, a process known as tapering. Powell has avoided overreacting to what he regards as temporary high inflation, but he is optimistic that the economy will soon return to more normal behavior.
Powell made it plain in his address that he and the Fed will continue to debate when it would be prudent to cut bond purchases, based on how the economy performs in the fall. Market participants are now anticipating an announcement when the Federal Open Market Committee (FOMC) meets in September.
The Fed is still on track to announce tapering intentions in the coming months, with the actual tapering process starting later this year or early next year, said Lawrence Gillum, LPL Financial’s fixed income strategist.
When the Fed announces the start of tapering, though, don’t expect any rate hikes in the near future. The timing and speed of the upcoming asset purchase reduction will not be meant to send a direct signal about the timing of interest rate liftoff, for which we have defined a different and significantly more severe test, Powell said.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
