(Bloomberg) – Federal Reserve Chairman Jerome Powell’s message to investors was brief and blunt: The central bank is likely to keep raising interest rates and keep them high for some time to fight inflation.
Powell warned in less than 10 minutes at the Fed’s annual policy forum in Jackson Hole, Wyoming, that “ Restoring price stability may require a restrictive policy stance for some time.”
“History strongly warns against premature easing,” he added.
The market got the message: “It’s a very clear response to the market’s expectation that the Fed will turn at 2023,” Chief Economist Bryant N Coulton said. Fitch Ratings. “That means putting rates above neutral with a larger rate hike at the upcoming meeting, and then keeping rates above neutral — possibly through the whole of next year.”
Stocks tumbled and U.S. Treasury yields climbed the curve as markets price in what higher long-term interest rates might mean for this year and next.
Here’s what other strategists said after Powell’s speech:
Win Thin, head of global currency strategy at Brown Brothers Harriman:
“It’s short and straight to the point. There’s no question that the Fed is far from stopping its efforts to lower inflation. The swap market is pricing in a final rate of 4%, and I think that’s likely to continue. Fed officials keep bringing up Paul Waugh Erke is no coincidence—the implications are obvious.”
Jeffrey Roach, LPL Financial (NASDAQ: LPLA ) Chief Economist:
“Powell said ‘price stability’ nine times in a speech of just 1,300 words, and he established this Case in point: A strong labor market depends on price stability. Essentially, Powell made it clear that fighting inflation is more important than supporting growth right now.”
Quincy Krosby, chief global market strategist, LPL Financial :
“The initial knee-jerk reaction came from the algorithm. Now traders are back where they thought Powell would be this morning — emphasizing price stability and the path to achieving goals.”
Jake Jolly BK, Senior Investment Strategist, Bank of New York Mellon (NYSE:
) Investment Management:
“The market is for a hawk, Set up with a ‘step-by-step’ speech, the initial impression was that exactly what Chairman Powell delivered. And it took just over 8 minutes. He shut down the idea of a recent turnaround, emphasizing an important historical lesson that policy must avoid premature easing Bottom line: Rates need to keep rising until they’re firmly in restrictive territory. Then they need to stay there.”
Kevin Simpson, Founder, Capital Wealth Planning:
is sometimes overlooked because the chair has a more dovish approach or a different interpretation,” he said. “This validates a lot of what we heard yesterday from Fed governors, explaining that It’s a real priority and they’re taking it seriously and as long as it needs to be done, they’re going to do what they need to do with the goal of lowering inflation. “
Ipek Ozkardeskaya, senior analyst at Swissquote Bank:
“The focus of this speech is clear: inflation and price stability. He is very clear that the Fed’s main target is to lower inflation, even if it means pain for households and businesses. “
“He’s also very clear that rate hikes will slow at some point and remain steady, but it’s clear that Powell’s current plan has no rate cuts at all. “
Founder Denis de Boucher) V Research:
“This is not a game-changing hawk. Absolutely not. “
” His comments just made it clear that inflation still needs to slow and they will continue to resist easy financial conditions until the job is done – or they think it’s done.
April LaRusse, head of investment specialists at Insight Investments:
“Powell’s comments were in line with our expectations. Contrary to the 2021 Jackson Hole speech, this one argues that inflation is short-lived and the focus is on controlling it, even at the cost of short-term pain to the economy. His comments about the need to keep rates high for some time suggest that the market is wrong to try to price in a rate cut as soon as possible 2023. “
Zachary Hill, Head of Portfolio Management, Horizon Investments:
“Powell’s remarks today do not change the fact that the market and the Fed have an opinion about the future of the economy.” The outlook is different. “
Bryce Doty, senior vice president, Sit Investment Associates:
“It’s hard to believe the Fed’s ‘damn torpedo’ approach argues that preventing The point of inflation is to raise the rate enough to destroy jobs. It just means the shortage will continue. The workforce may be considered powerful, but it’s certainly not healthy. “
James Assy, investment director at Aberdeen Asset Management:
I’m suspecting he made a mistake from the July conference press conference, he Opening the door to a turning point prematurely at this juncture. The irony, of course, is that they are backward-looking, with policies operating with a lag. As such, the news will soon appear a bit stale, not at the expense of lower inflation and/or weaker growth. “
(updated with additional commentary by Kevin Simpson)
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