Shares whipsaw as Fed weighs inflation risks, yields steady
By Samuel Indyk
LONDON (Reuters) -World stocks whipsawed on Friday after investors hoping for more dovish remarks from Fed Chair Jerome Powell instead got a balanced message that the Federal Reserve does not think the inflation fight is over, but it will proceed «carefully» in its next move.
In remarks delivered at the central bank conference in Jackson Hole, Wyoming, Powell said inflation was still too high even with recent favourable readings, and that the U.S. central bank has substantial ground to cover to regain price stability.
But at the same time, Powell noted that economic uncertainty called for «agile» monetary policy making, and that the Fed will proceed «carefully» when deciding its next policy move.
«There was a little something for everybody. If you're a bear, you heard him say we're going to be restrictive, and we might hike rates,» said David Sadkin, president at Bel Air Investment Advisors.
«If you're a bull, you heard him say, we're making progress against inflation and we still expect there to be a lag in from the effects of monetary policy, and we could be on hold.»
Indeed, the balanced remarks led U.S. stocks to gyrate between modest gains and losses. By 1546 GMT, the Dow Jones lost 0.17%, the S&P 500 fell 0.30% and the Nasdaq Composite shed 0.4%. [.N]
Losses on Wall Street weighed on global shares, and the MSCI All Country stock index slipped 0.56%.
U.S. rates investors nonetheless dialled back their bets of a rate hike in November and December following Powell's remarks, though Treasury yields traded near break-even by late morning.
The yield on 10-year Treasury notes fell 0.4 basis points to 4.231% and the two-year yield, which reflects interest rate expectations, rose 3.7 basis points to 5.056%.
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