Urgent: The head of the Federal Reserve detonates a bomb for the markets

Urgent: The head of the Federal Reserve detonates a bomb for the markets
Urgent: The head of the Federal Reserve detonates a bomb for the markets

Urgent: The head of the Federal Reserve detonates a bomb for the markets. It falls in dollars and rises in gold

The most important statements of the Federal President:

  • We may slow the rate hike in December
  • Inflation is still very high
  • Home services inflation may decline in 2023.
  • The market now expects the final interest rate to reach 5.02%.
  • The market is now expecting an increase of 50 basis points, reaching 75%, and only 25% for an increase of 75 basis points.
  • Powell says that to rebalance the labor market, the market must stop its current growth.
  • Powell says interest rates will be "somehow higher" in 2023 than the Fed had previously expected.
  • Powell believes that the core inflation rate, according to the personal consumption expenditures reading, will be 5% from 5.1% recorded in September. The inflation rate will decline to 6% from 6.2% recorded in September, according to the personal consumption expenditures index.
  • Powell says Fed should keep policy tightening 'for some time
  • Continuing to raise interest will be able to bring down inflation.
  • "We still have a long way" to reduce inflation
  • Declining growth should continue to fall below the general trend.
  • Home utilities and services expenses must be reduced.
  • According to historical precedent, care must be taken to ease monetary policy prematurely.
  • Powell says that workers now do not feel the increase in their salaries because any increase is swallowed up by inflation.

Goldman Sachs (NYSE: GS) released its outlook for the Fed's chairman's upcoming speech.

The main question for Jerome Powell will be about the Fed's accommodative policy after the October inflation report came in lower than expected.

Powell's expectations are that the Monetary Policy Committee will have to raise interest rates to their highest peak, and higher than expected, at the December meeting.

Goldman economists point out that the Fed's comments will be similar to other FOMC members' comments.

And Powell will stress that inflation is still very high, and the job market is still very strong.

Accordingly, Goldman Sachs believes that Jerome Powell will hint at a slowdown in the rate hike on December 14th.

Monitor the markets before the Fed

The dollar index is rising slightly after falling this morning, recording 106,830 levels, but it is still heading towards the largest monthly loss in 10 years.

Gold prices pared their gains, to record $1,767.55 an ounce, up 1.09% in futures contracts, while the spot gold price decreased by 0.19%, at $1,753.14 an ounce.

While the oil price is rising strongly with inventory data and waiting for OPEC + to cut production at next Sunday’s meeting. Brent oil records $86.84 a barrel, up 3.07%, while WTI records an increase of 2.95%, at $80.52 a barrel.

The Dow Jones index declined by 0.47%, to record a level of 33,692.82, down by 159.71 points.

Monitoring the market after the Federal Reserve Chairman's speech:

The US market is rising, the Nasdaq is up 0.7%, and the Dow Jones is cutting its losses.

The dollar index erased the gains and fell by 0.25%

Gold in futures contracts rose strongly by more than 1.31%, and spot contracts rose by 0.45%.

Oil continues to rise today, with Brent rising 3.03%, and WTI recording 2.98%.

The euro took advantage of the dollar's decline and rose 0.38%, at the level of 1.0368 euros per dollar.

The markets moved on the back of Powell's hint that the December rate hike will only be 50bp, not 75bp. But the final inflation rate by May 2023, as expected by the market, will be 5.02%, which is much higher than previously expected, and means that interest rates will remain high in the first half of next year.

Fed Chairman Bullard has previously hinted that the interest rate may remain high throughout 2023, and will not start cutting until 2024.

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