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Fed’s Powell floats dropping “transitory” label for inflation -Breaking

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© Reuters. FILE PHOTO – The Federal Reserve Building is shown in Washington, DC, U.S.A, August 22, 2018. REUTERS/Chris Wattie/File Photograph

(Reuters] – U.S. Federal Reserve chair Jerome Powell stated Tuesday that “transitory” no longer describes the true nature of current high inflation rates.

Powell replied to a question regarding his use of that term to explain how high the inflation would last in testimony before the Senate Banking Committee.

Powell stated that the central bank should consider closing its large-scale “taper,” of bond purchases faster based upon the strength and inflation rate.

Story:

STOCKS – The stock index extended lower, and was at its lowest point 1.2%

BONDS – The bond yield rose to 0.55532% after “transitory” comments.

FOREX: The turn 0.16% higher

COMMENTS:

DAVID KEATOR PARTNER, THE KEATOR GROUPE, LENOX MASSACHUSETTS

“The markets are reacting more to COVID news than inflation news. The market has strong confidence in the Fed, and the Fed has done a good job telegraphing how they’re going to handle inflation. They’re in a bit of a bind but handling it well. This is a normal cycle we’re seeing in the market. This is a normal cycle, so we just need to let it all play out.

“(Inflation is) going to slow down the economy and that will have an effect on earnings but we’re continuing to open up and I’m not yet worried about it. Wage inflation is here to stay but the supply chain issue will work itself out and we’ll start to see commodity prices coming down. The wage inflation will be more persistent.

The excuse of the day is “(The Omicron variation). The markets have had quite a run and it’s time to take a breather. Anything could have been the tipping point.”

ART HOGAN. CHIEF MARKET STRATEGIST, NATIONAL SECURITIES NEW YORK.

    “What the variant has done is likely decreased the talk of accelerating the pace of tapering, and that probably makes sense. There is no Fed lock. We may see an economic drag from this new variant, which we don’t yet know. However, if it becomes obvious that they are changing their plans that would be a major change.

    “Right now there were some expectations that we’d hear a more dovish Federal Reserve, but we’re not, we’re hearing a more hawkish Fed, but not that hawkish to the extent that people are betting that they’ll raise rates sooner next year.”

    “Retiring the word ‘transitory’ probably means that it’s too ambiguous a term, and that all that’s happened in the near term is it’s time to retire transitory because a lot of people thought transitory was a couple of months, and apparently transitory means a couple of quarters.”

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