Newzstocks are drifting lower Friday while expectations rise for the Federal Reserve to hike interest rates soon to get the nation's high inflation under control.The S&P 500 fell 0.3% after flipping between modest gains and losses through the morning. The Dow Jones Industrial Average was down 47 points, or 0.1%, as of 2:28 p.m. Eastern time, and the Nasdaq composite was 0.5% lower.The bond market had more of a reaction following Kevin Warsh's first time speaking as chairman of the Fed at an annual economic symposium in Jackson Hole, Wyoming.
The mountain setting has been the backdrop for major Fed policy announcements in the past, and the pressure was on Warsh.Worries had grown that his tough talk about getting inflation down to the Fed's 2% target may be just that, unless the Fed backs it up with action. The Fed could hike short-term interest rates to get inflation under control, but it could also feel deterred from doing so because that would slow the economy and hurt prices for investments. And President Donald Trump, who appointed Warsh, has been vocal about wanting interest rates to be lower rather than higher.Warsh was adamant again on Friday that he wants to give financial markets fewer clues about what the Fed plans to do with rates for its two jobs of keeping inflation low and the job market strong.
He has said he wants markets to react to what incoming data says about the economy and inflation rather than what the Fed says.But Warsh also said Friday that “short-term interest rates are the predominant tool” for the Fed to do its job. And he said, “I would be hard pressed to describe broad financial conditions as restrictive,” an implication that short-term interest rates may not be high enough to tamp down the economy and inflation.The yield on the two-year Treasury, which closely tracks expectations for what the Fed will do with its federal funds rate, jumped to 4.35% from 4.22% just before the speech.Traders are betting on a nearly 60% probability the Fed will hike its federal funds rate as soon as next month, up from the 35% probability they saw a day earlier, according to data from CME Group.Longer-term yields, which move more on expectations of what the economy and inflation will do in upcoming years, zigzagged right after the Warsh speech but eventually moved higher. The 10-year Treasury yield rose to 4.73% from 4.67% late Th…
The Dow Jones Industrial Average was down 50 points, or 0.1%, as of 1:12 p.m. The 10-year Treasury yield rose to 4.72% from 4.67% late Thursday.The 30-year Treasury yield was at 5.20%, up from … Federal Reserve Chair Kevin Warsh signaled on Friday the Federal Reserve is not ruling out an interest rate hike as inflation remains too high.
"We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do," Warsh said in a speech at the Fed's [...]
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