Biden has generally steered clear of commenting on the Fed’s actions over the past year, emphasizing the importance of the central bank’s policy independence from lawmakers and the White House. That is in contrast to Trump, who repeatedly berated Powell for the Fed’s decisions during his time in office. As for the belly of the Treasury market’s yield curve, shares of the iShares 3-7 Year Treasury Bond ETF were up 1%, FactSet data show, at last check.
Russell 2000 on pace for highest close in four months
- Powell acknowledged those concerns, noting that while the time was “drawing near” to make that decision, the central bank needed more data before pulling the trigger on lower rates.
- That is in contrast to Trump, who repeatedly berated Powell for the Fed’s decisions during his time in office.
- The Dow Jones Industrial Average jumped 457 points, or 1.2%, to about 37,036, after the Fed update.
- Committee membership changes at the first regularly scheduled meeting of the year.
The Fed embarked on its plan to raise interest rates more than a year ago. But the impact of that more restrictive policy hasn’t trickled into the broader economy in full force until the past six months. If the Federal Reserve does move to lower interest rates at its coming September meeting, it will be an apolitical move, Chair Jerome Powell said Wednesday. The Federal Reserve didn’t lower interest rates today, but its statement did tee up the possibility of a September cut. For now, federal regulators are focused on stabilizing the U.S. financial system and boosting public confidence in banks, Yellen said.
U.S. regional bank ETFs climb after Fed sees 75 basis points of cuts next year
In responding to a question on whether Powell believes it’s possible for the central bank to truly remain apolitical with a September rate cut, the Fed chair said that he “absolutely” does. Some economists see as many as seven rate cuts next year and others just two. Chair Jerome Powell said that the long-run, neutral rate of interest is a theoretical concept that can’t be directly observed.
Follow live coverage of the July FOMC meeting and Chairman Jerome Powell’s news conference.
The Federal Reserve forecast for a “soft landing” is not exactly a big surprise. The central bank’s official estimates for the economy never predict outright disaster given what it would say about how well the Fed is doing its job. Prices for the most-active contract had climbed by $4.10, or 0.2%, to settle at $1,997.30 an ounce on Comex Wednesday.
Powell Says Rates Are Hitting Housing but Return to Normal Could Take Years
Powell was appointed to the Fed board in 2012 under President Barack Obama and was selected as chairman by President Donald Trump in February 2018. The Federal Reserve raised interest rates by a quarter of a percentage point Wednesday, its ninth increase in about a year. “More weakness in their forecasts would tacitly signal a policy error,” U.S. economist Thomas Simons noted in an email to clients. Shares of the iShares 20+ Year Treasury Bond ETF were up 2.2% Wednesday afternoon, exceeding the 1.2% gains of the iShares Core U.S. Aggregate Bond ETF, according to FactSet data, at last check. The Vanguard Long-Term Treasury ETF was trading 2.1% higher on Wednesday afternoon. Prices for the precious metal got a boost as the U.S. dollar weakened in the wake of the Federal Reserve’s decision to leave interest rates unchanged.
Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen both stopped short of “whatever it takes” declarations regarding protecting customers’ bank deposits should recent turmoil in the sector escalate further. “The president still has confidence in Jerome Powell,” Press Secretary Karine Jean-Pierre told reporters in response to a question at a daily briefing. Officials also see slower economic growth in 2023 than they did a year ago, according to the so-called dot plot.
The average was up 462 points, or 1.3% in recent trading, with all but three of its 30 constituent companies trading in the green. Exchange-traded funds that buy regional bank stocks were advancing on Wednesday afternoon following the latest Federal Reserve interest-rate decision. Senior Federal Reserve officials are by no means unanimous in the central bank’s December forecast showing three cuts in U.S. interest rates in 2024. Powell acknowledged those concerns, noting that while the time was “drawing near” to make that decision, the central bank needed more data before pulling the trigger on lower rates.
An index of the overall cost of shelter climbed 5.4% from a year earlier in May, according to the latest consumer price index data. “A strong majority supported not moving at this meeting,” Powell said. The unemployment rate has started ticking up and consumer spending—particularly in categories sensitive to interest rates—has slowed. “Congress has ordered us to conduct our business in a non-political way at all times.Not just some of the time,” Powell said. But Fed officials do not base their approach to address the other factors like the political calendar, Powell emphasized.
Exchange-traded funds that invest in long-term Treasury bonds were rising sharply during Federal Reserve Chair Jerome Powell’s press conference on monetary policy. Monetary policy is restrictive, Powell said, noting that, ultimately, if Fed officials just set policy at a restrictive level, eventually there will be a “real weakening” in the economy. The FOMC maintained the target range for the federal-funds rate at 5.25% to 5.50% on Wednesday.
Gold futures rallied Wednesday afternoon in electronic trading, after ending the regular trading session with a modest gain. The 10- and 30-year rates also ended at their lowest levels since Aug. 9, at 4.032% and 4.183% respectively. “We’ve found now that there are big lags, so there’s sort of a — there’s a bulge of high past increases in market rents that has to get worked off, and that may take, you know, several years,” Powell said. In his speech, Chairman Jerome Powell said it’s a “balancing act” to lower inflation, manage the “very strong” labor market, and keep the economy growing. Fed officials also now forecast that inflation will end the year higher than initially predicted.
The Dow was on pace for a record close Wednesday, for the first time in nearly two years, after the Federal Reserve signaled a pivot to rate cuts could be in store for 2024. Federal Reserve officials slightly raised their forecast for long-run interest rates on Wednesday, prompting questions about how restrictive monetary policy currently is. Fed Chair Powell said in an afternoon press conference that the central bank was “very focused” on not making the mistake of keeping rates restrictive for too long. His comments were propelling all three of the major equity benchmarks higher Wednesday. U.S. stocks ended sharply higher on Wednesday, with the Dow Jones Industrial Average closing at an all-time peak after the Federal Reserve’s policy meeting. The Dow Jones Industrial Average closed 1.4% higher, while the S&P 500 gained 1.4% and the Nasdaq Composite climbed 1.4%, according to preliminary data from FactSet.
Plus, with the policy rate at 5.3%, the Fed still has “a lot of room to respond” to any perceived weakness, Powell said. “It’s a very difficult, challenging judgment, and we don’t want to go too soon, and we want to, don’t want to go too late,” Powell said, adding the central bank is feeling good about where rates are going. The Federal Open Market Committee’s next rate-setting meeting is Sept. 17-18, just several weeks ahead of the U.S. presidential election in early November. Yellen, however, said that if there’s a contagious bank run, the Treasury would likely pursue an exception that would permit the FDIC to protect all depositors of the failed banks. This would be considered on a case-by-case basis, she told senators. “[We’ve] not considered or discussed having anything to do with a blanket insurance or guarantees of all deposits,” she said in response to a question.
The Fed will also publish its latest Summary of Economic Projections, which includes officials’ forecasts for economic growth, inflation, unemployment, and interest rates. In response to a question at his post-Federal Open Market Committee meeting press conference on Wednesday, Powell said that he couldn’t promise to backstop all deposits, but that the Fed had other measures to prevent losses. The FOMC holds eight regularly scheduled meetings during the year and other meetings as needed.
Exchange-traded funds targeting shorter-term Treasurys had smaller gains, with the iShares 1-3 Year Treasury Bond ETF rising 0.5% in Wednesday afternoon trading. Federal Reserve officials continue to maintain their bias toward interest-rate cuts. Economists and Fed officials had hoped to see housing inflation ease this year as rents normalize from a postpandemic surge, but it is taking much longer than expected for lower rents to show up in inflation data. Officials’ collective forecast for interest rates now implies only one quarter-point cut by the end of 2024, a significant shift from earlier this year. Powell stressed that any shifts in monetary policy will be based on the economic data at hand.
The Dow scored its first record close since January 2022, according to Dow Jones Market Data. As time has gone by, the question of how restrictive monetary policy has become one that everyone is asking, he said, noting that Fed officials are asking it too. Increases in the central bank’s target for the federal-funds rate have pushed up the cost of mortgages, which in turn has dissuaded potential homebuyers. The average 30-year fixed mortgage rate is hovering around 7%, according to June 6 data from Freddie Mac, up from 6.6% at the end of 2023 and well above the record lows notched in 2021. Central bank officials are expected to leave interest rates unchanged when the Federal Open Market Committee releases its statement at 2 p.m.
The full effects of higher borrowing costs are just starting to be felt, they say. Simons is among the skeptics who still thinks it will be hard for the Fed to achieve a “soft landing.” That is, using high interest rates to bring down high inflation without causing a recession. Treasury yields ended sharply lower on Wednesday, led by a decline in the policy-sensitive 2-year rate, after Federal Reserve officials penciled in three… Higher interest rates are weighing on home-buying activity and having a “significant effect” on the housing market, but it could take years for rents to normalize, Federal Reserve Chair Jerome Powell said. The Federal Reserve’s policy-making committee voted to keep the benchmark interest rate steady at the conclusion of their meeting on Wednesday. The lagged nature of changes in interest-rate policy has prompted concerns that the Fed is already behind in cutting rates.