Key Points:
- Federal Reserve Chairman Jerome Powell hints at further rate rises during a speech at the ECB symposium, aligning with the Fed’s hawkish stance on inflation.
- ECB President Christine Lagarde also expresses support for additional rate hikes.
- Market expectations anticipate another 0.25 percentage point rate increase at the upcoming July meeting.
On June 28, Federal Reserve Chairman Jerome Powell clearly hinted at the likelihood of more rate rises, reiterating the Fed’s hawkish position on inflation.
Powell spoke at the European Central Bank (ECB) symposium in Sintra, Portugal, and stated:
“What we’re aiming for is a stance of policy that’s sufficiently restrictive to bring inflation down to 2% over time. As you get closer to that, you get closer to the place where the risks become more in balance.”
Powell’s words on the day are consistent with the Fed’s June meeting economic outlook, which forecasted two further rate rises of 25 basis points this year, as well as Powell’s testimony to Congress last week.
During a question-and-answer session chaired by Sara Eisen on CNBC, Fed Chair Jerome Powell said that a series of rate rises would not be “taken off the table” at the Fed meeting. The interview was also attended by ECB President Christine Lagarde, Bank of England (BOE) Governor Andrew Bailey, and Bank of Japan (BOJ) Governor Kazuo Ueda.
Considering this projection, the Fed is unlikely to decrease interest rates anytime soon.
“We will be restrictive as long as we need to be. If inflation is coming down sharply and we’re confident that it’s on a path to 2%, that would be a different situation—you would begin to think about loosening policy, but we’re a long way from that,” Powell said.
ECB President Lagarde also indicated strongly additional rate rises.
“We are not seeing enough tangible evidence of falling underlying inflation,” she said, adding that she was not thinking about slowing rate hikes.
The conference comes two weeks after Powell and his Fed colleagues announced a temporary pause in a sequence of ten consecutive interest rate hikes that started in March 2022. Other central banks, on the other hand, have remained active in their battle against inflation, with both the ECB and the Bank of England recently announcing rate rises.
Markets anticipate that the Fed will approve another 0.25 percentage point hike at its July meeting, then remain on hold as policymakers assess the effect of the increases on the economy. But, in the June meeting, Fed policymakers planned two more rate rises.
Following Jerome Powell’s speech, Bitcoin is currently still trading above the $30,000 mark.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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Harold
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