Jerome Powell event: Live coverage of Fed chief's remarks after big slide in bond yields (2024)

Key reads

The SPDR S&P Bank ETF was up 3.7% at $41.87 a share in recent trade, while the SPDR S&P Regional Banking ETF is up 4.8% at $47.28. The latter remains down 19.6% for the year, and has yet to recover from the losses it sustained following the collapse of Silicon Valley Bank back in March.

Financials have seen strong performance since the start of November. The S&P 500 Financials Sector is up for the 5th straight week, on pace for its longest weekly winning streak since the 5-week winning streak ending January 2021

Markets are reading Friday's comments by Federal Reserve Chairman Jerome Powell as dovish, and it may boil down to the use of a single new word added to his assessment of the current level of monetary policy.

In remarks made in November, Powell described policy as "restrictive." But on Friday, the Fed chair said he thinks policy is "well into restrictive territory.''

It's the use of the word "well" that appears to be making a difference right now, according to Jeffrey Roach, chief economist for LPL Financial in Charlotte, N.C. "I think it’s fair for markets to latch on to that subtlety," Roach said in an email.

Mohamed El-Erian, chief economic advisor at Allianz and president of Queens' College at the University of Cambridge, said on X that Powell tried to push back on market pricing of notable rate cuts next year.

Here's our writeup:

Fed Chairman Jerome Powell said the economy is still in a place where past experience is not a useful guide.

"There isn't any experience with year-three of a pandemic recovery. It's just unique," Powell said.

"The economy has repeatedly surprised us and all other forecasters," Powell said.

HE said he wasn't aware of any forecasters who predicted the strong economic growth this year.

Fed Chairman Jerome Powell stressed that he doesn't want to move quickly on monetary policy.

"We don't need to be in a rush now. We're getting what we wanted to get. We now have the ability to move carefully," Powell said.

Fed funds futures traders are boosting the likelihood that the Federal Reserve will start cutting rates by early next year, despite Chairman Jerome Powell's view that officials would be prepared to tighten if needed.

The likelihood of a quarter-point rate cut by January rose to 10.11% Friday morning, up from 4% a day ago, according to the CME FedWatch Tool. In addition, the market-implied chance of such a move by March jumped to 56.8%, up from 41.5% on Thursday. Such a rate cut would bring the fed funds rate target down to between 5%-5.25%.

Meanwhile, investors extended the buying momentum seen in Friday's session, sending 3-month through 30-year Treasury yields mostly lower.

Treasury yields remained lower on Friday as traders assessed the latest remarks from Federal Reserve Chairman Jerome Powell.

The policy-sensitive 2-year yield was down more than 10 basis points on the day, at below 4.6%, despite Powell's view that officials are still prepared to tighten policy further if needed.

UBS Global Wealth Management expects bonds will keep rallying next year and the Federal Reserve will start cutting interest rates in 2024 as inflation eases.

“We expect bond yields to fall in 2024, supporting returns for the asset class,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, in a note Friday, ahead of Fed Chair Jerome Powell’s remarks at Spelman College in Atlanta. But “the decline in yields is unlikely to be smooth,” she said.

The recent bond-market rally has been “underpinned by rising hopes that the Fed will cut rates next year, with the latest market pricing suggesting almost five 25-basis-point reductions by December 2024, with a 50% chance that the first cut comes as early as March,” she said in the note.

“We think the market may have run ahead of the likely pace of cuts,” Marcelli said. “Our base case is that the Fed will deliver two to three cuts next year, with the timing data dependent, but most likely starting in July.”

UBS forecasts the 10-year Treasury yield will end 2024 at 3.5%. That’s below the 10-year Treasury note's 4.27% yield on Friday morning, according to FactSet data, at last check.

Fed Chairman Jerome Powell said Friday that the Fed's interest-rate committee "is moving forward carefully."

In a note to clients, Gregory Daco, chief economist at EY, translated that into a signal of that the Fed will hold rates steady at the December meeting. Carefully means keeping rates constant, he said.

Powell said the Fed is moving meeting-by-meeting.

Pushing back on economists and markets who expect Fed rate cuts as soon as March, Fed Chairman Jerome Powell said Friday it would be "premature...to speculate on when policy might ease." Core inflation is still well above target, he said. He repeated that the Fed would raise rates further if necessary.