Federal Reserve Chair Jerome Powell waved his magic wand and gave investors a bit more confidence today, following a two-day meeting of the central bank. Powell managed to share a brighter economic outlook and ease inflation concerns. How? And what else do you need to know.
As a quick recap, today marked the end of a two-day Federal Open Market Committee (FOMC) session. Investors have been carefully waiting for an update from the central bank, especially as inflation concerns weigh on stock prices. The last time we heard from Powell, he failed to ease those concerns, ultimately causing the major indices to plunge. Following the passage of the $1.9 trillion American Rescue Plan, what Powell said today was even more important.
With that in mind, here are five takeaways from the Powell speech:
- The FOMC shared plans to maintain near-zero rates over the next three years, aligning with expert predictions. This is not surprising, but gives investors more insight that a rate increase is likely not coming until 2024.
- Powell also said that the economic recovery we have seen thus far is due to low rates and other unprecedented monetary actions. He said because of this, the Fed plans to maintain its accommodative policy until it meets employment and inflation goals.
- As a reminder, Powell said that the Federal Reserve seeks to reach maximum employment in the United States and stable prices.
- In regards to inflation, Powell said that he anticipates inflation to go above the 2% target in the near term. However, this is in order to keep an average of 2% in the long term, which he says is key to economic health.
- Powell also shared optimism regarding economic growth. He sees key industries improving, and is encouraging Americans to wear masks, get vaccinated and social distance to further that recovery.
Powell Speech: The Bottom Line
The biggest takeaway is that Powell and other Fed officials have a brighter outlook for the U.S. economy. With hopes of lower unemployment and stable prices on the horizon, investors are certainly feeling a bit more confident. A few minutes before the closing bell, each of the major indices was in the green.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.