Stocks rise as Fed’s Powell revives interest rate hopes
HONG KONG
Asian stocks rose on Wednesday following fresh records on Wall Street after Federal Reserve chief Jerome Powell fanned hopes of an interest rate cut by saying the battle against inflation had made "progress" and the job market was cooling.
After a run of above-forecast data and warnings from central bank officials suggesting monetary policy would remain elevated for some time, the remarks provided fresh optimism that a reduction, and possibly two, was on the way before the end of the year.
Still, that was not enough to help the euro against the dollar as traders fret over weekend polls in France that could see the far-right take power, which some warn could put the European Union's second-biggest economy on a collision course with the bloc.
Speaking at a forum in Portugal on central banking, Powell said the Fed had "made quite a bit of progress in bringing inflation back down to our [2 percent] target, while the labor market has remained strong and growth has continued."
"We want that process to continue."
He also pointed to "substantial" work on softening the labor market, a key target among decision-makers. Key non-farm payrolls report will be closely followed on July 5, with investors hoping for a slowdown in hiring that could give the Fed room to cut.
Powell said the 2 percent goal could possibly be reached "maybe late next year" or in 2026. The consumer price index came in at 3.3 percent in May, having peaked at a four-decade high above nine percent in 2022.
Futures traders believe there is a roughly 70 percent chance of a rate cut by mid-September, while it is more likely than not that it will make a second cut by the end of the year, according to CME Group data.
