Powell Signals Pause in November, but Keeps Warning About Potential Increases

In a growing environment of speculation and uncertainty in the financial market, the words of Jerome Powell, president of the Federal Reserve, have never been more anticipated. In the last meeting with the Economic Club of New York, Powell hinted that interest rates could remain unchanged at the next monetary policy meeting in November. However, this does not mean that the door is closed to future adjustments.

At the time of publication, US stocks were falling on Thursday, trying to recover from a sell-off. The Dow Jones Industrial Average fell about 0.70%, while the S&P 500 fell 0.80% and the Nasdaq Composite fell 1%.

Treasury yields rose for the fourth day in a row. The benchmark 10-year yield closed up 5% for the first time in 16 years, while the 2-year yield – seen as a guide to interest rate expectations – jumped to its highest level since 2006 in around 5.24%.

Inflation, that old acquaintance of economists and the public, seems to have not yet let up. Powell recognized this reality by stating that the index still presents itself at worrying levels. The possible stability of rates next month does not rule out monetary tightening in the future, if the economic scenario continues to surprise positively.

The tone adopted by the Fed president was one of caution. During his speech, Powell made a point of reinforcing the central bank’s balanced position, avoiding sudden fluctuations that could have a disastrous impact on the economy. “We have a delicate road ahead. Speeding up is not always the best. Likewise, going too slow also has its risks,” he commented.

Recently, other Fed members and representatives echoed Powell’s position, asking for patience in assessing economic trends. The direction of the economy, along with the pace of inflation, will be crucial in determining the next steps regarding interest rates.

The Fed chairman was emphatic in pointing out the dangers of both extremes. While inaction can result in chronically high inflation, subsequently requiring more drastic measures, hasty action can harm economic growth.

All eyes now turn to the next meeting of the Fed’s Federal Open Market Committee, scheduled for November 1. Expectations are for the interest rate to remain at its current level, oscillating between 5.25% and 5.50%. The event will take place after a 10-day lockdown, during which Fed officials will remain silent without issuing public statements.

Amid so many events, Powell’s speech in Manhattan was briefly interrupted by protesters, causing him to be escorted out of the room for a few minutes.

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