Investors will be turning their eyes to Fed Chief Jerome Powell this week as he makes a statement before the US Congress on the latest interest rate decision. The Federal Reserve, the central bank of the United States, decided last week not to raise interest rates. But stock analyst Jean-Paul van Oudheusden doubts that means a permanent end to hikes: “On paper, Powell said last week that one or two more interest rate hikes will follow this year, but many investors don’t they believe it”.
Skip instead of pause
Last week, Powell announced that interest rates would remain between 5 and 5.25% for now. The fact that there are no more hikes would mean that inflation has slowed sufficiently, but according to Van Oudheusden one shouldn’t celebrate too soon. “Powell could have said in his speech last week that he was going to pause interest rates, but instead he said it’s kind of a jump.”
“Fresh rate hikes in July cannot be ruled out.”
Because of this specific choice of words, Van Oudheusden believes this is an exceptional interest rate decision and that there will still be an increase this year. Only this time, therefore, the interest rate will remain unchanged. “Fresh interest rate hikes in July cannot be ruled out,” says Van Oudheusden.
Headwind
But whether it’s a pause or a jump, it’s a major break with the Fed’s normal interest rate policy. “You could call it a major breakthrough after months of hikes,” says Van Oudheusden. “Many investors thought all those hikes would destroy the economy, but the numbers that are now available show only a few headwinds. So it’s not that bad.’
The fact that all hikes so far have not caused too much damage, according to Van Oudheusden, only shows that we can count on even bigger hikes this year. ‘If there jump they say, one or two rate hikes will follow shortly. There’s really no other way Powell is going to just repeat what he already put on paper last week.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
