The Fed Chairman expressed continued support and US Treasuries rose
US government debt rose and the dollar weakened as the Fed chairman overturned concerns about soaring inflation and reiterated the central bank’s commitment to maintain its pandemic stimulus measures until the strength of the economic recovery is more certain.
The 10-year US Treasury bond yield fell 0.06 percentage points to 1.35%, while the ultra-long 30-year Treasury bond yield fell 0.07 percentage points, hovering below 1.2%. The U.S. dollar index, which measures the U.S. dollar against a basket of trading partner currencies, fell 0.4%.
After the data showed U.S. headlines, Jay Powell submitted his semi-annual monetary policy report to Congress on Wednesday. Consumer price increases It rose 0.9% from May to June, exceeding economists’ forecasts and setting the largest monthly increase since 2008. The consumer price index rose 5.4% year-on-year.
Federal Reserve Chairman Shaken From his long-term perspective, the recent burst of inflationary pressures (most pronounced in sectors related to reopening) will prove to be temporary.
Although Powell does admit that the rate of inflation has exceeded initial expectations, he said he believes that as bottlenecks and other supply chain constraints ease, price pressures will ease over time.
Taking into account the lack of employment growth and the need for further recovery of the entire labor market, he affirmed the Fed’s reasons for maintaining loose policies for a period of time. He said that the threshold for changing the size of the central bank’s monthly debt purchases of US$120 billion is “still far away.”
Powell’s remarks came as a survey released by Bank of America this week found that the proportion of investors who believe the economy will continue to improve A sharp decline From a peak of 91% in March to 47% this month.
Royal Bank of Canada Capital Markets analyst Mark Fielding said, “Despite significant progress in vaccination and the expected reopening of the global economy, the market has begun to worry more that the expected growth rebound may fade faster than expected.”
“In response, bond yields have again begun to fall sharply,” Fielding added.
Wall Street stocks hit an all-time high on Wednesday as investors weighed this concern with expectations that earnings will fall in the second quarter. The largest year-on-year increase Since the financial crisis.
The blue chip S&P 500 index rose slightly by 0.1% that day, while the technology-focused Nasdaq Composite Index fell 0.2%. The European Stoxx 600 index closed down 0.1%, still close to the record high set this week.
Mark McCormick, global head of foreign exchange strategy at TD Securities, said: “We may now see peaks in growth, inflation, and stimulus in many countries.” “The market is slowly absorbing this turning point, but as Delta Air Lines [coronavirus] The number of cases is increasing rapidly, and the outlook remains highly uncertain. “
Elsewhere, British assets have been hit by data showing that the country’s inflation rate exceeds the Bank of England’s target, which has increased the pressure on the central bank to reduce its own debt purchases.
United Kingdom Consumer price increases Data on Wednesday showed that it was 2.5% in the 12 months to June. The pound rose 0.4% to $1.388 against the dollar, and the blue-chip FTSE 100 index fell 0.5%.
The derivatives market related to the Bank of England’s interest rate movements on Wednesday is expected to increase UK interest rates to 0.25% by November 2022. Prior to the release of inflation data, this upward adjustment is expected in May 2023.
John Wraith, head of UBS UK interest rate strategy, said that the Bank of England policymakers “will undoubtedly still insist that price pressures will be short-lived”. “But during this period, whether in absolute terms or relative to their own predictions, the higher the interest rate, the more this belief will be undermined.”
The global oil benchmark Brent crude oil price fell nearly 3% to US$74.39 per barrel. The UAE and Saudi Arabia have close relations OPEC + production agreement between member states.
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