Newly minted Federal Reserve Chair Jerome Powell faced Congress for the first time Tuesday, and he’ll be back again Thursday. Already, the stances he’s taken have affected gold prices. To summarize, Powell said he wasn’t concerned about recent stock market volatility, and that he worries more about inflation. He also claimed to see “as many as four” interest rate increases in 2018. He acknowledged the stimulus from tax cuts and increasing government spending, though he stopped short of tying them directly to rising inflation.
So, a fairly hawkish start to his first term as Fed Chair. Powell’s immediate predecessors were often criticized for their proactive efforts to calm markets when they got volatile. The press even gave this a name: the Bernanke put. Powell didn’t show his hand in that regard, and it’s far too early to speculate on what he’ll do if volatility increases or the market heads down in a big way. In the wake of his remarks the US Dollar gained strength, gold prices fell slightly, and no one was terribly surprised.
Powell came across as intelligent and straight-shooting, something we all love in financial policy makers. Powell goes back before Congress today, and it will be interesting if he says anything more of substance or if it’ll be reiterating the same points. Right now, we’re expecting the first interest rate hike to happen later in March.