Jerome Powell Speaks to Economic Club of Washington Ahead of Stock Market On-Edge
By U.S. stock markets this morning are on edge ahead of Federal Reserve Chairman Jerome Powell's speech before the Economic Club of Washington.[0] Markets are eagerly awaiting clues about the future of interest rates in light of last Friday's jobs report, which far exceeded expectations.[1] Last week’s rate hike announcement moved the Fed’s base policy rate to between 4.5 and 4.75 percent, and markets are now pricing in 100% odds that the Fed will hike a quarter-point on March 22 and 76% odds that the Fed will hike another quarter-point on May 3.[2] This would bring the federal funds rate to a 5%-5.25% range, which December Fed projections indicated would be the likely peak of the cycle.[3]
On Tuesday, David Rubenstein, Chairman of the Economic Club of Washington, D.C., was spoken to by Powell.[4] He said that the US labor market remains “extraordinarily strong” and that the central bank has more work to do to bring down inflation.[5] Powell commented on the January jobs report, which revealed a notable 517,000 jobs were added to the US economy, saying, “We didn’t anticipate it to be this robust.”[5] This demonstrates why we believe this will be a lengthy endeavor.
The process of getting inflation down has begun in the goods sector, which is about a quarter of the economy, Powell said.[6] However, the Fed chair noted that price gains within the services sector remain high and the disinflationary process has a long way to go.[6] Powell said that the Fed needs to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy.[7]
Minneapolis Fed President Neel Kashkari also expressed his opinion that the strong jobs report shows that the Fed needs to keep raising interest rates.[0] He said that rates need to climb to around 5.4 percent.[2]
Elsewhere, Chinese internet giant Baidu (BIDU) skyrocketed after unveiling plans to launch its own AI chatbot, while Oak Street Health (OSH) surged more than +30% in pre-market trading after the Wall Street Journal reported that the company is close to an agreement to be acquired by CVS Health for about $10.5 billion.[0] Activision Blizzard (ATVI) rose over 5% after earnings, while Pinterest's (PINS) stock fell 3.[0]
0. “Markets Today: Stocks Slightly Higher Ahead of Fed Chair Powell's Speech” Barchart, 7 Feb. 2023, https://www.barchart.com/story/news/13975845/markets-today-stocks-slightly-higher-ahead-of-fed-chair-powells-speech
1. “Stock Market News Today: Indices Turn Volatile after Powell Speech” TipRanks, 7 Feb. 2023, https://www.tipranks.com/news/stock-market-news-today-futures-up-ahead-of-powell-speech
2. “Fed's Powell speaks on economy, job market” The Washington Post, 7 Feb. 2023, https://www.washingtonpost.com/business/2023/02/07/powell-economy-jobs/
3. “Fed Chair Jerome Powell Sticks To Disinflationary Script; S&P 500 Slips” Investor's Business Daily, 7 Feb. 2023, https://www.investors.com/news/economy/fed-chair-jerome-powell-sticks-to-deflationary-message-sp-500-rises/
4. “Powell Says Further Rate Hikes Needed Amid ‘Strong' Labor Market” Bloomberg, 7 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-07/powell-says-further-rate-hikes-needed-amid-strong-labor-market
5. “Fed Chair Powell: Inflation fight will take ‘a significant period of time'” Channel3000.com – WISC-TV3, 7 Feb. 2023, https://www.channel3000.com/news/money/fed-chair-powell-inflation-fight-will-take-a-significant-period-of-time/article_211c5f36-b41b-596b-ac13-2236c9762316.html
6. “Fed Chair Powell: Inflation fight will take ‘a significant period of time'” CNN, 7 Feb. 2023, https://www.cnn.com/2023/02/07/economy/jerome-powell-economic-club-speech/index.html
7. “Fed's Jerome Powell Says Hiring Surge Shows Why Inflation Fight Could Be Difficult” The Wall Street Journal, 7 Feb. 2023, https://www.wsj.com/articles/feds-jerome-powell-to-address-economic-outlook-with-hiring-surge-in-spotlight-11675781503
