Federal Reserve Chair Jerome Powell signaled a major shift towards cutting interest rates during his speech at the Jackson Hole Economic Symposium.
Federal Reserve Chair Jerome Powell signaled a major shift in U.S. monetary policy on Friday, indicating that the central bank is preparing to cut interest rates. Speaking at the annual Jackson Hole Economic Symposium, a premier gathering of global central bankers, Powell’s remarks were closely watched by investors for clues about the Fed’s future actions.
Powell Signals Rate Cut Intentions
“The time has come for policy to adjust,” Powell stated in his address, adding that “the direction of travel is clear.”
These comments mark a significant departure from the Fed’s recent stance of maintaining higher interest rates to combat inflation. Powell expressed growing confidence that the battle against inflation is on track, suggesting that the Fed is now ready to ease its monetary policy.
The speech, delivered on August 23, 2024, comes at a time when markets were already anticipating potential rate cuts. Prior to Powell’s remarks, there was a 78% probability priced in for a 25 basis point rate cut in September. This shift in policy is likely to be viewed positively by financial markets and could lead to the first Fed rate cut since 2020.
Stock Market Surges as Rate Cuts in Sight
As of 10:06 AM EDT on the day of Powell’s speech, financial markets showed a positive response to the Fed Chair’s comments.
The Dow Jones Industrial Average rose 292.1 points (0.72%) to 41,004.88, while the NASDAQ climbed 217.29 points (1.23%) to 17,836.64. The S&P 500 also saw gains, up 49.96 points (0.9%) to 5,620.6.
In the commodities market, gold prices increased by $17.4 (0.69%) to $2,534.1, and oil prices rose $1.24 (1.7%) to $74.25 per barrel. Treasury yields fell, with the 10-year yield dropping 0.052 to 3.81% and the 2-year yield decreasing 0.059 to 3.951%.
The U.S. Dollar Index weakened, falling 0.41 (-0.41%) to 101.1, while the VIX volatility index decreased by 1.12 (-6.38%) to 16.43, indicating reduced market uncertainty.
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Originally Posted August 23, 2024 – Powell Signals End of Rate Hikes, Wall Street Surges
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