Market Updates
Fed Chairman Powell Suggested Terminal Rates to Exceed Previous Estimates
Brian Turner
07 Mar, 2023
New York City
Federal Reserve chairman Jerome Powell said the central bank is ready to increase rates faster if incoming data supported the case.
Moreover, Powell added that the terminal rates are likely to be higher than previously estimated.
Chairman Powell noted that latest economic data have been stronger-than-anticipated and to bring down inflation to 2% and restore price stability will require raising rates to restrictive levels.
At the Fed's policy meeting in February, the committee raised the target range for federal funds by 25 basis points to between 4.5% and 4.75%, the highest level since 2007.
Powell highlighted the difficulties in bringing down inflation to the long-run rate of 2%.
"We are seeing the effects of our policy actions on demand in the most interest-sensitive sectors of the economy. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.
In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation," noted Powell in his prepared remarks.
The talk of faster rate hikes and higher terminal rates spooked investors and tech stocks accelerated the decline in early trading.
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