Following a recent speech by the Federal Reserve Chair Jerome Powell about this exact same subject, here’s what happened
After Powell mentioned that the U.S. economy will maintain tight monetary policies to bring inflation under control, an index of global stock markets fell.
But at the same time, short-term U.S. Treasury yields went on the increase.
Powell’s words also impacted the dollar positively but the value of gold dropped.
So what do tight monetary policies actually entail?
According to Reuters “Powell said that it will include slower growth, a weaker job market and “some pain” for households and businesses”.
And further continued “Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions.”
The Federal reserve will have a policy meeting in late September, and many are curious whether any changes will be discussed. However Powell didn’t mention it.
Many experts do believe that the interest rate hikes will continue.
Following this speech, much of Wall Streets indexes fell including Tech stocks.
U.S stocks plunged by 3% after Powell remained firm on rate rises.
And he said the Central bank ‘must keep at it until the job is done’ in relation to inflation.
Only time will tell, how this will impact the markets in the long term.
