Powell has dispelled all expectations that the Fed will pause its tightening policy or cut interest rates next year
Over the past week, Wall Street has been speculating about what message Federal Reserve Chair Powell is preparing to deliver at the Jackson Hole Global Central Bank Symposium. On Friday morning (August 26) local time, Powell said in his speech that although the U.S. economy is slowing down, the Fed remains committed to fighting inflation through a restrictive monetary policy
This speech, which could have lasted 30 minutes, only took 10 minutes. Powell made it clear that if sufficient action is not taken, the consequences would be more 'painful' than being conservative
Ed Yardeni, Chief Investment Strategist at Yardeni Research, said: 'Powell's speech was brief and tough in wording, and he dispelled all expectations that the Fed will pause its tightening policy or cut interest rates next year'
After Powell's speech ended, the U.S. stock market plummeted sharply, ending a two-day rally. The Dow Jones Industrial Average closed down more than 1,000 points on Friday, a drop of 3%, marking the worst performance since May 18. The S&P 500 fell 3.4%, and the Nasdaq Composite dropped 3.9%, both recording their biggest declines since mid-June
Barron's noted that the only surprising aspect of Powell’s speech this time was that the market got scared, as Powell had essentially been conveying the same message over the past period, and now the market has finally decided to listen to him
'Pain'...