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Jerome Powell confuses the market

Investors continue to parse every single word

Federal Reserve Chairman Jerome Powell (Credit: Bloomberg)

Fed Chair Jerome Powell said yesterday that the Fed’s benchmark interest rate was“just below” the neutral level. With these two words, Powell signaled that the central bank is close to the point where it will no longer increase rates. 

Flashback: Just last month, Powell said that the benchmark rate was a “a long way” from neutral, which left investors concerned that multiple rate increases would impede growth. The small wording change sent stocks soaring, erasing the losses from a rocky November. 

Reading the tea leaves… Analysts quickly warned that investors were overreacting as there was little evidence in the rest of Powell’s speech that he intended to halt interest rate hikes. Stay tuned!

What comes next: The Fed’s benchmark interest rate now sits in a range of 2 and 2.25 percent. Although the bank is still expected to raise rates in December, bond traders are only pricing in one rate hike next year, according to MarketWatch.

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