Powell Highlights The Importance Of Fed’s Independence For Price Stability

Vladimir Zernov
Updated: Jan 11, 2023, 07:52 UTC

Fed Chair Powell noted that unpopular decisions were necessary to push inflation back to Fed's target.

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Key Insights

  • Fed Chair Powell spoke at the symposium in Stockholm, Sweden. 
  • In his speech, Powell focused on the importance of central bank independence for price stability. 
  • Powell also noted that Fed would not set climate policy. 

Powell Defends Unpopular Decisions Needed To Fight Inflation

Today, Fed Chair Jerome Powell delivered a speech on central bank independence in Stockholm, Sweden.

Powell noted that stable inflation was the foundation of a healthy economy and added that the central bank was taking actions that were necessary but not popular.

He highlighted Fed’s indepedence and noted that it was extremely important to insulate monetary policy decisions from short-term political considerations.

Powell’s speech focused on the role of central bank independence in the U.S. economy and the world economy in general. Powell did not provide any additional insight on monetary policy.

Interestingly, Powell also commented on the topic of climate policy and noted that it was not Fed’s task to set climate rules.

S&P 500 Gains Ground After Powell’s Speech

S&P 500 moved higher after Fed Chair Jerome Powell speech. The speech did not contain new information for markets, and it looks that traders were relieved that he did not say anything too hawkish.

U.S. dollar pulled back from session highs, and the U.S. Dollar Index was mostly flat in today’s trading. While the Fed will continue to raise rates in order to fight inflation, traders expect that the central bank would not be too hawkish.

Interestingly, Treasury yields are moving higher in today’s trading session, but this move does not provide support to the American currency.

The yield-sensitive gold is trading near multi-month highs. Powell’s speech did not put any pressure on gold markets as it contained no surprises.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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