The Fed: 5 things we learned from Jerome Powell’s ‘whipsaw’ press conference

by | Nov 2, 2022 | Stock Market

No one was surprised Wednesday when the Fed lifted its benchmark interest rate by 0.75 percentage points for the fourth consecutive policy meeting, raising the fed funds rate to a range of 3.75% to 4%. The central bank also said it would be mindful of lags and the cumulative impact of policy. But that was the calm at the start of a roller-coaster ride.

It was during Fed Chairman Jerome Powell’s press conference that the twists and turns started. “Markets were whipsawed by the overall communications by at first pushing yields and the dollar lower and stocks higher post-statement, and then reversing those moves — and then some — during and after the press conference, to end up with an overall hawkish interpretation,” summarized Derek Holt, vice president of Scotiabank Economics. Where does all of this leave us? Here are some key takeaways from the Fed chairman’s press conference:Terminal rate is going to 5% or higher “Powell is guiding that the median [interest rate] is likely to hit 5% or higher, which implies there may be several [Fed officials] above that level,” Holt said. Powell had been asked about how high the Fed might go before pausing its rate hikes. He said said that the rate needed to be sufficiently restrictive in order to achieve the 2% inflation goal over time. “We think there is some ground to cover before we meet that test,” he said, “The ultimate level of interest rates will be higher than previ …

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