Fed Chair Jerome Powell Signals Slower Pace Of Rate Hikes Ahead

U.S. Federal Reserve Chairman Jerome Powell signaled in a speech that a slower pace of interest rate increases is likely to begin at the central bank’s next meeting on December 14, news that sent American stock markets sharply higher.

The comments made during a speech at the Brookings Institution in Washington, D.C. included a reiteration that borrowing costs in the U.S. need to keep rising and remain restrictive to lower inflation that is currently at 7.7% in America and well above the Fed’s 2% target.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said.

The comments have increased expectations that the central bank will lift interest rates a further 50 basis points at the December 14 meeting, following four straight 75 basis-point hikes.

The Federal Reserve has now raised the target range of its benchmark interest rate to a range of 3.75% to 4%. In March of this year, the rate stood at zero.

Investors welcomed the comments from Chair Powell, with U.S. stocks jumping 3% higher and the S&P 500 moving above its 200-day moving average for the first time since April. The technology laden Nasdaq 100 index gained almost 5% after Powell spoke.

Economists now forecast that the U.S. central bank will pause interest rate hikes in the second quarter of 2023 once its trendsetting rate reaches about 5%.