The Federal Reserve’s July hike and Powell’s market-moving comments

The bar for the Fed to start cutting interest rates is high and is going to require actualized data, which may materialize at the end of the year, when the central bank may feel confident that inflation is better controlled, according to Frances Donald, global chief economist for Manulife Investment Management.

“We now believe that the Fed is on a prolonged ‘hawkish hold,’” she said. “In our base case, their next move will likely be a cut but it will take until 2024 until we see it. That said, Powell will have no choice but to keep the threat of hikes alive, lest he encourage markets to prematurely price in cuts and re-ignite inflation expectations.”

“Indeed, throughout this coming extended pause, the risk to our base case will likely almost always be for one last hike to cement the disinflationary trend,” she added. “Because inflation’s improvement is likely to stall in the next 2-3 reasons for largely mathematical reasons, market probabilities of rate hikes at future meetings will remain non-zero and would be unwise to completely fade this even as we don’t expect any additional hikes.”

— Tanaya Macheel

The S&P 500 and the Nasdaq Composite shed earlier gains and turned lower.

The broad market benchmark slipped 0.2%, while the tech-heavy index fell 0.4%.

The Dow Jones Industrial Average remained positive, but only marginally so. The 30-stock Dow was up about 10 points, or 0.02%, as of 3:15 p.m.

–Darla Mercado

Federal Reserve Chair Jerome Powell during Wednesday’s press conference suggested that rate cuts are unlikely to come this year.

“I’m saying we would we be comfortable cutting rates when we’re comfortable cutting rates, and that won’t be this year, I don’t think it would be,” he said.

On the topic of rate cuts next year, Powell said it’s going to be a “judgement” they make based on how “confident” they are.

— Samantha…