Powell spoke Thursday evening at the Economic Club of New York, and during and after the speech and subsequent questioning there were major movements on Wall Street. Immediately after the speech was published, the overall mood among investors was positive, while in the hours following the speech there was a frequent shift between highs and lows for the three major indices.
In the end, all three indicators finished sunny in the red. The Nasdaq fell 0.96 percent, the Dow Jones fell 0.75 percent, and the S&P 500 closed down 0.85 percent.
After Powell’s speech, there were also significant fluctuations in the interest rate market, with the ’10-year’ getting another boost. At 20.40, the long market rate rose to 4.99 percent, before falling somewhat again.
Powell: Not so tight now
Powell said in his speech that he still believes that inflation in the country is very high, and he still keeps the door open for further raising interest rates.
A few good months with good statistics is just the beginning of what is needed to make sure inflation is on its way toward our target, Powell says.
Meanwhile, Powell says current monetary policy is “not too tight now.”
We realize that recent data shows resilience in the face of economic growth and labor demand. But if we see signs that inflation is increasing again, we may have to tighten monetary policy again, Powell says.
The ten-year-old put on his pants on Wednesday
Also on Wednesday evening, the US 10-year yield rose again – to new highs since the previous peak in 2007. “Ten-year” is the nickname given to the interest rate on US government bonds with a maturity of ten years, often referred to as the rate The most important interest in the world.
Credit expert Pall Ringholm previously said that the rise from the bottom of half a percent in 2020 was so rapid that you have to go back to the French Revolution to find a corresponding proportional increase. Now it has risen further to just under five percent. It is not a given that the matter will stop there.
– It is very likely that a 10-year-old will exceed five percent,” SEB chief strategist Erica Dalsto told DN earlier on Thursday.
Powell’s speech will be crucial to interest rate developments. And now there are several Fed members who have come out and tried to speak out against rising long-term interest rates. Therefore, Powell is expected to support this message. There are almost extraordinary simultaneous connections regarding the development of long-term interest rates, says D’Alsto.
In the morning hours of Thursday, the ten-year-old’s rate was 4.97 percent – not far from five percent.
“I think there is a psychological limit,” says D’Alstow, but he adds:
– It does not change the outlook in this sense. The big question is whether the interest rate will remain at these levels for a long time or whether it is a temporary high level. She says that will be more important for markets.
According to the chief strategist, there are various factors that have pushed interest rates higher in recent days. D’Alsto believes this is partly driven by strong new headline economic figures from the USA, but also the risk of growing escalation in the Middle East has contributed to higher market interest rates.
Oil prices have risen about seven percent since the outbreak of the conflict about two weeks ago.
On the whole, it is the repricing of real interest rates that has pushed up long-term interest rates, says Dalsto.
The chief strategist believes that the fact that investors are raising long-term interest rates is a sign that the Fed is gaining more momentum for signals that the interest rate will be higher for longer. But it is also a result of growing attention to the US budget deficit. The United States may have to increase its lending in the market, which means there will be more government bond sales, which in turn could push interest rates higher.
Kelly Chen, a macroeconomist at DNB Markets, says there is uncertainty about whether the Fed’s December interest rate meeting will deliver an eventual increase, and she believes the question now is how long interest rates will remain high.
– The answer seems to be: “Long.” Key figures from the US economy recently show that it has withstood interest rate hikes reasonably well, so expectations of imminent interest rate cuts are much lower as well, Chen says.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links that lead directly to our pages. No copying or other use of all or part of the Content may be permitted except with written permission or as permitted by law. For more terms see here.
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