Fed Chairman Powell warned of the possibility of further policy tightening

Jerome Powell, the Chairman of the Federal Reserve, bolstered the faltering US dollar.

50The dollar index rose to a four-day peak of approximately 106.50.

At the 24th annual Jacques Polak Research Conference in Washington, DC, US Federal Reserve Chairman Jerome Powell discussed US monetary policy in relation to current global inflation.

Although demand is gradually weakening, the labor market remains tight due to improving labor supply bringing it into better equilibrium.

Powell stated that GDP growth was quite robust in the third quarter, however, similar to the majority of prognosticators, we anticipate that growth will decelerate in the upcoming quarters.

A monetary policy response may be necessary if stronger economic growth threatens to impede further progress in rebalancing the labor market and reducing inflation.

Inflation in the United States has decreased in the last twelve months, yet still remains higher than the 2% goal set by the Federal Reserve. The Fed is content with the progress made, however, they anticipate that it will take a while to bring inflation down to the desired 2%. This was stated by the leader of the Federal Reserve.

He stated that the Federal Open Market Committee (FOMC) is striving to attain a monetary policy that is stringent enough to reduce inflation to 2% in the long run, yet "we are not sure that we have attained that point."

Powell warned that continued progress towards the 2% inflation target is not guaranteed, citing that inflation has "cheated us several times". He added that if further tightening of policy is necessary, they "will not hesitate to do so".

The Fed will remain cautious in their actions, thus avoiding the potential of being misled by a few positive months of data, as well as the danger of tightening too much.

CIBC Capital Markets predicts that the US dollar will continue to increase in value over the next few quarters and recommends taking advantage of any dips in the dollar's value. It is anticipated that the dollar will reach its highest point by the middle of 2021.

NBF predicts that the US dollar is likely to become stronger due to worries of a worldwide economic downturn and renewed political conflicts in the Middle East.

The likelihood of a Fed rate hike at the December gathering rose to 14.5% from 9.6% the preceding day.