Federal Reserve Chair Jerome Powell said Wednesday it was too early to declare victory over inflation, but financial markets have effectively declared victory for him. Some economists, still worried about inflation, think that letting the market drive the bus will lead to trouble down the road.
The central bank’s forecast of three rate cuts next year overshadowed Powell’s attempt to sound sensible, careful and cautious about the outlook, said Krishna Guha, vice chair of Evercore ISI. The markets viewed the three-cut forecast “as a validation of [the Fed’s] dovishness,” agreed Stephen Stanley, chief U.S. economist at Santander. That dovishness ignited a strong market rally Wednesday, with the Dow Jones Industrial Average
DJIA
soaring to all-time high while the dollar
DXY
and bond yields
BX:TMUBMUSD10Y
sank. “The shored-up sentiment among market participants has caused financial conditions to become the loosest they have been during the central bank’s tightening campaign, which is likely to create a renewed bout of inflation,” said Jose Torres, a senior economist at Interactive Brokers. He noted that all commodities are sharply higher in the wake of Powell’s comments. Stanley said he found it hard to believe the Fed’s very upbeat economic scenario, in which a 1.4% annu …
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The central bank’s forecast of three rate cuts next year overshadowed Powell’s attempt to sound sensible, careful and cautious about the outlook, said Krishna Guha, vice chair of Evercore ISI. The markets viewed the three-cut forecast “as a validation of [the Fed’s] dovishness,” agreed Stephen Stanley, chief U.S. economist at Santander. That dovishness ignited a strong market rally Wednesday, with the Dow Jones Industrial Average
DJIA
soaring to all-time high while the dollar
DXY
and bond yields
BX:TMUBMUSD10Y
sank. “The shored-up sentiment among market participants has caused financial conditions to become the loosest they have been during the central bank’s tightening campaign, which is likely to create a renewed bout of inflation,” said Jose Torres, a senior economist at Interactive Brokers. He noted that all commodities are sharply higher in the wake of Powell’s comments. Stanley said he found it hard to believe the Fed’s very upbeat economic scenario, in which a 1.4% annu …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]