FX.co ★ Powell comments on interest rates and inflation

Recently, the US Fed has been grabbing headlines only as a former workplace of newly appointed Treasury Secretary Janet Yellen. However, experienced traders know that they should keep abreast of the regulator’s actions.

Market participants are closely monitoring the Fed’s comments, including the recent speech delivered by Fed Chairman Jerome Powell. His words tackled uncertainties over the US economic future. The fact is that the US consumer spending on goods and services slumped. Moreover, the annual inflation rate is below the targeted level of 2%. All this may lead to serious economic consequences in the short-term. Under the current conditions, the US Fed will have to follow its ultra-loose monetary policy until the economic revival is completed.

“The connection between low interest rates and asset values is probably something that’s not as tight as people think,” Fed Chairman Jerome Powell said. “We’re going to be patient. Expect us to wait and see and not react if we see small, and what we would view as very likely to be transient effects on inflation,” Powell says.

Jerome Powell also alleviated concerns saying that the regulator had all the necessary tools to cope with inflation. He also added that the Fed would telegraph its intention to scrap the stimulating program in advance.

Jerome Powell emphasized that he was much more preoccupied with lower paces of recovery than by inflation. “I’m much more worried about falling short of a complete recovery,” he said. “I’m more concerned about that than the possibility, which exists, of higher inflation.”