Jerome Powell delivered his final press conference as Federal Reserve chair on Wednesday, signaling that the central bank has likely finished its rate-hiking campaign. Powell stopped short of declaring victory but indicated the Fed would pause future increases, citing progress on inflation that has moved closer to the 2 percent target.
The Fed left rates unchanged at 5.25 percent to 5.5 percent, as expected. Powell emphasized that officials will assess incoming data before making decisions on future rate cuts, projecting three reductions in 2024. He acknowledged persistent inflation in services and shelter costs, acknowledging these categories remain sticky despite headline inflation improvements.
Powell's comments triggered a modest rally in equity markets. The S&P 500 and Nasdaq both climbed following the announcement, as investors interpreted the pause as a signal that the tightening cycle has ended. Bond yields fell, with the 10-year Treasury sliding below 4 percent, reflecting expectations for looser monetary policy ahead.
The departing chair addressed recession concerns directly. Powell stated the labor market remains resilient, with unemployment holding at 3.8 percent, and consumer spending continues to support economic growth. These factors, he argued, reduce the likelihood of a hard landing in 2024.
Powell's tenure at the Fed spanned eight years and two administrations. He guided the central bank through the pandemic, implemented aggressive rate hikes starting in 2022 to combat inflation, and oversaw the financial system through the Silicon Valley Bank collapse in March 2023.
Lael Brainard will replace Powell as Fed chair in January 2024. Her confirmation cleared the Senate Banking Committee in September.
The market response underscores how closely investors track Fed messaging. Powell's dovish tilt, coupled with data suggesting inflation has plateaued, sets the stage for potential rate cuts later in 2024. This shift marks a dramatic reversal