Fed Chair Jerome Powell’s eagerly awaited speech will move markets on Friday afternoon. DAX, Dow Jones and Co jump back and forth in an initial reaction, but then lose significant ground. The head of the central bank has announced a restrictive monetary policy for some time to come and has spoken out against premature easing.
The inflation data from July were welcome, said Powell. But this trend must continue. The ultimate goal remains inflation of two percent.
In order to achieve this, the Fed will “use its instruments vigorously,” the Fed chairman continued. Further interest rate hikes could cause “some pain” for the US economy. But the current level is not yet sufficient “to stop or take a break”. Failure to restore price stability would cause far greater pain than higher interest rates.
DAX, Dow Jones and Co go back to diving after Powell’s statements. The fear of sharp interest rate hikes and a recession is increasing significantly. Investors should therefore keep their feet still before the weekend.