Closing Bell 10th November: Fed Chairman Powell Hints at Further Rate Hikes, Markets React

Fed Chairman Signals Possible Rate Hikes

Jerome Powell, U.S. Federal Reserve Chairman, has indicated that the Fed may consider further rate hikes if necessary, countering market expectations of interest rate cuts next year. During a conference in Washington, Powell emphasized readiness to tighten policy if it becomes “appropriate,” a stance that unsettled Wall Street and spiked bond yields. This marks a shift from earlier sentiments that suggested the Fed might not raise rates further, highlighting the central bank’s commitment to carefully navigate economic data risks and manage inflation towards their 2% target. National Australia Bank’s Tapas Strickland noted Powell’s stern, arguably hawkish tone, contrasting with other Fed speakers from the past week.

RBA’s Inflation Outlook Leads to Rate Decision

The Reserve Bank of Australia has slightly raised its long-term inflation forecasts, following a period of rate-setting deliberation. Despite considering another halt in rate increases due to consistent inflation expectations with targets, the bank decided to increase the cash rate from 4.1% to 4.35%. This decision came after acknowledging the risk of sustained high inflation and a series of economic challenges including moderated wage growth, a cooling economy, and softer labor market conditions. The central bank’s quarterly statement postulated less progress on inflation reduction than previously anticipated.

Oil Prices on the Decline Amid Demand Worries

Oil prices are set for a third consecutive weekly fall, influenced by demand concerns and diminishing war-risk premium, with Saudi Arabia attributing the drop to speculative trading. West Texas Intermediate (WTI) crude remained around $76 a barrel, experiencing a 6% decrease over the week. Saudi Energy Minister’s comments echoed previous criticisms of speculators, preceding output cuts. WTI has seen about a 15% drop over three weeks due to negative demand indicators from major economies and the contained Israel-Hamas conflict not disrupting Middle Eastern oil flows. Hedge fund manager Pierre Andurand also highlighted unexpected supply surges from the U.S. and Iran as contributing factors to the decline.