When Jerome Powell was nominated as chair of the U.S. Federal Reserve back in November, investors took comfort in the fact that he represented the continuity choice in terms of policies pursued by Janet Yellen. Powell’s testimony before the House Financial Services Committee on Tuesday reinforced that view, but the market’s outlook for interest rate hikes appears to have changed slightly.
All indications from Powell suggest his confidence in the U.S. economy is on the rise, and inflation should climb to the Fed’s target of two per cent. The Fed chair didn’t add a fourth rate hike in 2018 to his outlook, but his comments do suggest the central bank may move again as soon as March.
Tom Porcelli, chief U.S. economist at RBC Capital Markets, expected that Powell would stop short of significantly altering the perceived path of near-term monetary policy.