Jerome Powell Back In Hawkish Policy Lane? Why Economists Feel Fed's 'Higher For Longer' Narrative Hasn't Changed: 'Markets Need To Focus On The Fact That...'
Portfolio Pulse from Shanthi Rexaline
Federal Reserve Chair Jerome Powell indicated a need for a prolonged period of restrictive monetary policy, suggesting the central bank's 'higher for longer' interest rate stance remains unchanged. Economists and analysts, including Peter Schiff and Jamie Cox, provided mixed reactions, with some advocating for rate hikes due to inflation concerns, while others highlighted the strong labor market and consumer spending. The bond market reacted, with the 10-year bond yield nearing 4.7%, and major index futures trading lower. The iShares 7-10 Year Treasury Bond ETF (IEF) and the SPDR S&P 500 ETF Trust (SPY) both saw declines in their last session.
April 17, 2024 | 7:25 am
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NEGATIVE IMPACT
The iShares 7-10 Year Treasury Bond ETF (IEF) experienced a decline, closing down 0.39% at $91.36, following Powell's hawkish remarks on interest rates.
The decline in IEF's price can be directly attributed to the market's reaction to Powell's comments, which have led to a reassessment of risk and a shift in investor sentiment towards bonds, particularly those in the 7-10 year range.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) fell 0.18% to close at $503.53, as Powell's comments on maintaining higher interest rates for longer influenced equity markets negatively.
SPY's decline is a direct consequence of the hawkish monetary policy stance indicated by Powell, which has led to a dampened outlook for equities as investors adjust to the prospect of sustained higher interest rates.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80