Fed needs more time to gain confidence before it starts loosening monetary policy
Talking down an inflation victory at this point could well help keep the lid on market bullishness
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THE US Federal Reserve curbed the market’s enthusiasm with a sobering rate outlook on Wednesday (Jun 12), and did so by design.
Stock buyers had gone on a wild spree after a softer-than-expected reading of consumer price index (CPI), which showed a 3.3 per cent rise in the price of a basket of goods in May. During his press conference, Fed chairman Jerome Powell noted that the CPI typically runs hotter than the personal-consumption expenditure index, which corresponded with consumer inflation, at around 2.7 per cent.
Purchases of rate-sensitive stocks were particularly giddy, with the Russell 2000 Index adding roughly 3 per cent before the central bank statement hit the tape.
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