Morning Brief – Powell Pump

Markets are in a buoyant mood today after Federal Reserve Chairman Jerome Powell’s speech yesterday, which saw the FED head talking up a 50-basis point hike at the next meeting.

Federal Reserve Chairman Jerome Powell basically confirmed on Wednesday that smaller interest rate increases are likely ahead and could start in December.

Mr. Powell, in a speech Wednesday, said an overheated labour market needed to cool more for the Fed to be confident that inflation would decline toward its 2% goal.

Powell also said, “We will stay the course until the job is done,” during his unexpectedly bullish speech in Washington, D.C. at the Brookings Institution.

However, Powell also cautioned that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation. Stock market futures remain in the green this morning.

Nick Timiraos from the Wall Street Journal, so-called FED watcher who has leaked the details of many the United States Federal Reserve’s decision on the past gave his thoughts after the speech.

Timiraos said “Federal Reserve Chair Jerome Powell provided a clear signal that the central bank is on track to raise interest rates by a half percentage point at its next meeting, stepping down from an unprecedented series of four 0.75-point rate rises aimed at combating high inflation.”

China pulling back on COVID-19 restrictions are also starting to have an impact on the market as a number of Beijing officials state that the Chinese government are about to pull back.

It is being reported that Beijing is to let some low-risk Covid patients isolate at home. The change is said to be sparked by the latest protests and stretched infrastructure.

This morning we are also seeing headlines from Bloomberg that are stating this, reaffirming that we are seeing a further shift in China’s Covid measures. The pivot away from the zero-Covid approach is gathering pace.