LIVE: Fed chair Jerome Powell speech. Gold gains 1% 📈

How Wall Street reacts to Powell?

US short-term interest-rate futures rise after Fed chair Powell's remarks. Wall Street indices are traded slightly higher with Dow rising 0.3% and US500 0.25% gains. Overall, Powell tone was quite dovish, but the Fed chair signalled that a bank is still ready to raise rates. At the same time economic outlook is unclear however Fed expect slower spending and output in 2024 which support 'rate cuts thesis' but also possibility of 'recession' scenario. 

Federal Reserve chair, Powell speech:

'The Fed does not need to be in a rush now; we are getting what we wanted to get.'

• I expect spending and output to slow over the next year. Unemployment is up but still historically low.

• The job market has cooled, but is still strong. Labor market conditions ‘very strong’ and unemployment is up but still historically low.

• Fed actions have defended inflation-fighting credibility. I welcome the recent softening in inflation data.

• Wage growth, still high but moderating to a more sustainable level. We need to see more progress on lowering inflation to 2%.

• Inflation has eased, but core inflation is still too high. It is ‘premature’ to say monetary policy is restrictive enough.

  • Fed will raise rates again if needed to lower inflation. Uncertainty over the economic outlook is ‘unusually elevated’.

• Fed Funds range well into restrictive territory. The Fed has made considerable progress lowering inflation.

• FOMC ‘moving forward carefully’ as risks of under- and over-tightening are becoming more balanced.

• The job market has cooled, but is still strong, and Fed actions have defended inflation-fighting credibility.

• I welcome the recent softening in inflation data, but we need to see more progress on lowering inflation to 2%.

• Inflation has eased, but core inflation is still too high. Wage growth still high but moderating to more sustainable level.

• Fed spends more time talking to congress than before. US fiscal policy is unsustainable in the long run.

• There is a path to getting inflation down to 2% without large job loss, and we are on that path.

• The data will tell the fed if it has done enough or needs to do more, as inflation is still well above target but moving in the right direction.

• I have been surprised on the upside this year with inflation coming down meaningfully but growth and jobs continuing.

• Credit card use and defaults mean spending may be slowing, and we think GDP is slowing based on the limited data that we have.

Declines on US100 has been stopped at SMA100 level (black line) but we will have to wait for final markets reaction.

Source: xStation5

At the same time, we can see that GOLD extends gains. The perspective of slowing demand, output and GDP in the US economy may be bullish for precious metals and bonds.

Source: xStation5