Powell noted that the economy is “near max employment, price stability” and major asset class valuations are “not far in excess,” which could mean there may be more room to run for U.S. equities. Furthermore, Powell states that the economy is growing “well above most estimates” and that “there is a great deal to like about this outlook.”
The CME Group’s FedWatch Tool, an algorithm that calculates the probability of a rate hike in a given month, is now showing an 82.7% chance the Federal Reserve will institute a fourth rate hike for December. Powell’s latest comments come as various Fed members signaled dovish tones to various media outlets.
“This is perhaps an overreaction to what was hardly a binding promise to reconsider the path of future rate rises, but at the very least it did remove any possibility of a more aggressive policy being signaled at the December meeting, and opened up the possibility of a pause or halt to rate hikes taking place in the first half of 2019,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management.
For more trends in fixed income, visit the Rising Rates Channel.