Fed’s Powell comments about interest rates confuse markets

Statements by US Federal Reserve Chairman Jerome Powell that he could raise interest rates further if necessary as part of an effort to reduce inflation and return it to its previous rate of 2% caused a decline in many markets.

The statements were reflected in a decline in European stocks, which ended the longest series of gains for the Nasdaq and Standard & Poor’s 500 indices in two years, as well as Wall Street and the Japanese Nikkei index, in addition to gold prices, which were affected by the rise in the dollar.

Powell said in statements during a panel discussion on “Monetary Policy Challenges in the Global Economy” at the twenty-fourth annual Jack Pollack Research Conference at the International Monetary Fund headquarters in Washington. “We know that continued progress towards our 2% target is not guaranteed,” he added, adding, “If it becomes appropriate to tighten policy further, we will not hesitate to do so.”

Powell’s statements come about a week after the US Central Bank voted for the second time in favor of keeping the interest rate fixed at its highest level in 22 years, which strengthened expectations that it would not be raised again.

Powell’s comments indicate that the US central bank is still concerned about the possibility of a return to acceleration in inflation, which has fallen by more than half since its peak last year.

Despite the monetary tightening followed by the Federal Reserve and its raising of interest rates to a level ranging between 5.25 and 5.50%, it recently indicated that US economic activity maintained its strength in the third quarter.

Traders in the financial market believe that there is a 90% probability that the Federal Reserve will vote to keep interest rates steady at its next meeting on December 1.