Fed chair Powell speech sends US Dollar lower

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  • November 30, 2022

This is a developing story

Fed Chair Powell’s policy speech is a key event today:

Watch live: Fed Powell speech

In his first comments since the post-decision press conference on November 2, where he warned of a higher terminal rate, Fed chair Jerome Powell said today:

Key comments

Makes sense to moderate pace of interest rate hikes.
    
Time to moderate pace of rate hikes may come as soon as december meeting.
    
 Have made substantial progress toward ‘sufficiently restrictive’ policy, have more ground to cover.
    
 ‘It seems to me likely’ rates must ultimately go ‘somewhat higher’ than policymakers thought in September.
    
 Likely to need to hold policy at restrictive level ‘for some time’.
    
History cautions strongly against prematurely loosening policy.

More to come…

There will be a Q&A with further comments to follow:

More to come…

 

Meanwhile, since the November 2 presser, markets have tuned into other Fed officials who have been framing the bank’s message. There have been conflicting tones from officials with, for instance, Fed vice chair Lael Brainard who has played up the move to smaller hikes, while others such as St Luis CEO, James Bullard, have played up the need for even higher rates. 

The November 2 FOMC statement seemed to hint at a pivot, but Chair Powell pushed back against such notions of a pivot during his press conference. 

”We believe he will take the same tone today; that is, the Fed may move to smaller hikes but the terminal rate is likely to be much higher than previously expected,” analysts at Brown Brothers Harriman said. 

US Dollar update

The dollar index, DXY, has fallen on the initial release of the speech from the 107 area to test below 106.70. It remains above the low made of 106.29 on the day but was below the 20-year high of 114.78 on Sept. 28.  The greenback is on track for its biggest monthly loss since September 2010 as investors look toward the Fed reaching a peak rate early next year.

About Fed Jerome Powell

Jerome H. Powell took office as a member of the Board of Governors of the Federal Reserve System on May 25, 2012, to fill an unexpired term. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chairman of the Federal Reserve. Powell assumed office as Chair on February 5, 2018.