Investors bet Powell's Fed will get more aggressive on inflation

www.iol.co.za
3 min read
fairly difficult
Investors are betting that newly renominated US Federal Reserve Chairman Jerome Powell will need to step up the pace at which the central bank is normalising monetary policy to better grapple with surging consumer prices.
By David Randall NEW YORK (Reuters) - Investors are betting that newly renominated Federal Reserve Chairman Jerome Powell will need to step up the pace at which the central bank is normalising monetary policy to better grapple with surging consumer prices.

For months, Powell has insisted the current bout of inflation is likely to be transitory, and said the central bank will be "patient" in deciding when to begin raising its benchmark rate from near-zero. The Fed kicked off the taper of its $120 billion per month bond buying program in November, with a plan to end purchases altogether in mid-2022. Some investors, however, believe the Fed will need to taper faster and raise rates sooner than expected to tame rising consumer prices, which grew at the quickest pace in more than three decades in October. Their view has been reinforced by recent public debate among some Fed officials on whether to withdraw support for the economy more quickly to help tame inflation. One barometer of investors' monetary policy expectations, futures on the federal funds rate, on Monday afternoon had priced in a 100% chance that the central bank will raise rates by July, from 92% last week.

News of Powell's nomination on Monday also sent yields on shorter-dated Treasuries, which are more sensitive to rate views, to their highest level since early 2020. Powell is widely seen as more hawkish than Fed Governor Lael Brainard, who was also vying for the top job. Investors are "challenging the Fed to some extent and becoming more concerned about the Fed falling behind the curve on…
Reuters
Read full article