Federal Reserve Chairman Jerome Powell collapses the US dollar again

On Thursday, the US dollar experienced a further decrease in value following the remarks made by the Federal Reserve chairman.

Jerome Powell's remarks were quite subdued.

Jerome Powell, Chairman of the Federal Reserve, declared on Thursday at the Economic Club of New York that the incoming data from recent months demonstrate that they are making steady progress towards accomplishing both of their dual mandate objectives of maximum employment and stable prices.

In February 2022, annual core PCE inflation (excluding the volatile components of food and energy) peaked at 5.6%, but it is estimated to have dropped to 3.7% in September, which is a very positive development. Powell noted this decline in inflation rates during the summer.

In spite of the short-term indicators being unsteady, inflation remains too high. Therefore, it will take more than a few months of positive data to create assurance that inflation is gradually decreasing towards the 2% goal.

Job openings have dropped significantly from their peak and are now only slightly higher than before the pandemic began. Surprisingly, the decrease in inflation did not lead to a major rise in unemployment - this is a very positive development, although it is not something that has been seen before.

Powell remarked that the economic growth this year has been astonishingly robust, as evidenced by the impressive retail sales figures released earlier this week.

He stated that in order to achieve a sustained return to the 2% inflation target, a period of below-trend growth and additional loosening of labor market conditions would likely be necessary.

The Federal Reserve Chairman reported that the Federal Open Market Committee (FOMC) has taken drastic action on monetary policy over the past 18 months, raising the federal funds rate by 525 basis points at a rapid rate and decreasing securities holdings by approximately $1 trillion.

He emphasized the importance of striking a balance between measures to further modify monetary policy in order to avoid inflicting unnecessary damage to the economy.

Powell stated that due to the current level of uncertainty and risk, the Federal Open Market Committee (FOMC) is taking a cautious approach. Decisions regarding the degree of additional policy tightening and how long the policy will remain restrictive will be based on a combination of incoming data, changing prospects, and the balance of risks.

The probability of the key rate staying at its current level at the November 1 meeting rose to 99.5% from 93.4% the day before the head of the Fed's speech. The market now believes there is a 24.8% chance of a rate hike in December, down from 39.2% the day before.