Powell Predicts that Interest Rates Will Remain High for Some Time Due to Persistent Inflation

The world’s largest bond market was hammered again, with the two-year yield briefly reaching 5% as Jerome Powell signalled policymakers are not in a hurry to cut interest rates.

The Federal Reserve chief stated that it will likely take longer to have confidence in inflation, adding that it is appropriate to give restrictive policies time to work. Treasury yields rose to new 2024 highs, but bonds recovered some losses as dip buyers emerged. The dollar posted its best five-day gain since October 2022. Equities fell.

The S&P 500 fell to around 5,050. Bank of America fell as a charge-off for soured loans exceeded expectations, while Morgan Stanley rose as traders generated strong revenue. UnitedHealth Group led the Dow Jones Industrial Average’s gains following its results. Treasury 10-year yields increased six basis points to 4.66%.

Powell’s comments represent a shift in his message following the third consecutive month in which a key inflation indicator exceeded analyst expectations. It also demonstrates that officials see little urgency in lowering interest rates, implying that any cuts in 2024 will come relatively late in the year, if at all.