US Fed speech: Jerome Powell boosts warning on crypto industry and its ‘turmoil’ | Mint - The first knowledge sharing application in Vietnam

US Federal Reserve Chair Jerome Powell on Tuesday informed that US interest rates will likely peak at a higher level than previously expected due to stronger economic data. He further pointed out that January figures of employment, consumer spending, manufacturing production and inflation indicate a partial reversal of earlier softening trends.

This was likely due to “unseasonably warm weather,” said Powell adding “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

Powell on Tuesday laid out a series of concerns he has with crypto, and said lenders the regulator oversees must be “taking great care” when engaging with it. He added that the central bank didn’t want to prevent innovation.

“We don’t want regulation to stifle innovation in a way that just favors incumbents and that kind of thing,” Bloomberg quoted Powell saying during a hearing before the Senate Banking Committee, where he added, “But, like everyone else, we’re watching what’s been happening in the crypto space and what we see is quite a lot of turmoil, we see fraud, we see a lack of transparency, we see run risk.”

The announcement had an immediate impact on US stocks. Stocks are falling on Wall Street Tuesday following the head of the Federal Reserve warned it could speed up its economy-rattling hikes to interest rates if pressure stays high on inflation.

The S&P 500 was 1.2% lower in afternoon trading. The Dow Jones Industrial Average fell 460 points, or 1.4%, to 32,970, as of 1:15 p.m. Eastern time, while the Nasdaq composite was 0.7% lower.

The Fed has already raised its benchmark lending rate eight times since early last year, as it contends with inflation that has remained stubbornly above its long-term target of 2%. The Fed’s preferred inflation measure, the personal consumption expenditures price index, reached an annual rate of 5.4% in January.

At the same time, the labor market remains “extremely tight,” Powell said.

“To restore price stability, we will need to see lower inflation in this sector, and there will very likely be some softening in labor market conditions,” he said.

US job gains had surged unexpectedly in January while unemployment slipped to its lowest rate in more than five decades, despite efforts to cool the economy.

While wage growth has slowed, analysts believe this is not yet enough for the Fed.

A strong labor market supports incomes and, in turn, demand.

Policymakers have been concerned that elevated wages could feed into inflation, complicating the battle to rein in prices.

Powell’s appearance on Tuesday comes shortly after the US central bank released a semiannual report on monetary policy, which pointed to a tight labor market, robust job gains, historically low unemployment and elevated nominal wage growth.

Here is the full speech.

Federal Reserve Chairman Jerome Powell is again warning US banks about the risks of getting involved in the digital-asset industry.

“We don’t want regulation to stifle innovation in a way that just favors incumbents and that kind of thing,” he said during a hearing before the Senate Banking Committee. “But, like everyone else, we’re watching what’s been happening in the crypto space and what we see is quite a lot of turmoil, we see fraud, we see a lack of transparency, we see run risk.”

European shares logged their steepest one-day fall in two weeks on Tuesday as investors assessed the prospects of a 50-basis point rate hike by the U.S. Federal Reserve following hawkish remarks by Chair Jerome Powell.

The pan-European STOXX 600 index closed 0.8% lower, with real-estate and technology stocks taking a sharp hit.

(With inputs from agencies)

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