Closing post
Time to recap
America’s top central banker has warned that the Federal Reserve is prepared to switch back to bigger interest rate rises to fight inflation, if necessary.
Fed chair Jerome Powell told the Senate Banking Committee that the central bank has “more work to do”, even though the full effects of its tightening have not been felt yet.
Powell told senators that interest rates are likely to peak higher than previously thought, given the strength of the US economy.
Powell says:
The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.
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.
The markets now estimate there is over a 50% chance that the Fed lifts interest rates by half a percentage point later month, having slowed to quarter-point rises in its last two meetings.
And the probability of 50bp at the next meeting is now above 50 percent. That is about where it should be now--and we'll see what's in the jobs report, CPI, and other data. pic.twitter.com/sWAIRHvVLU
— Jason Furman (@jasonfurman) March 7, 2023
These comments hit US bond prices, driving up the yield on two-year Treasury bills to almost 5%, the highest level since 2007.
The pound is sliding against the US dollar, hitting a two-month low around $1.186 tonight, down over a cent and a half.
Shares on Wall Street have fallen, pulling the Dow Jones Industrial Average down by around 1%.
In other news…..
A senior Bank of England policymaker has expressed concern that UK companies could be exploiting the cost of living crisis to push through inflation-busting price increases.
An elderly woman was cut off from her money for three months and lost her phone line and energy supply when a banking error by Barclays marked her as deceased.
UK consumers sharply cut back their spending in February as soaring living costs damaged household finances, retailers have warned.
But.. house prices rose unexpectedly last month, Halifax reports, as the fall in mortgage rates boosted demand.
Business leaders have warned that frayed relations with the EU are costing the British economy, as suppliers in the bloc grow more cautious about doing business with post-Brexit Britain.
Bakery chain Greggs has said higher wage and energy bills are weighing on profits, but it’s still pushing ahead with 150 new store openings this year.
Women in Britain are being priced out of work and suffering from a growing gender pay gap as the result of a lack of affordable child care, a new report from PwC has found.
National Grid has asked power plants in Great Britain to generate extra electricity on Tuesday night before the coldest night of the year.
A publicly owned electricity generation firm could save Britons nearly £21bn a year, according to new analysis.
And…the owner of the Daily Mirror and the Express has published its first articles written using artificial intelligence – but its boss says journalists should not fear it means being replaced by machines. Phew.
Updated
Shares have fallen in New York too, as traders respond to Jerome Powell’s hawkish comments about the need to keep raising interest rates to tackle inflation.
The Dow Jones industrial average has shed 292 points, or 0.9%, to 33,138 points. Almost all the 30 companies on the index are in the red, led by Walgreens Boots Alliance (-2.1%) and JPMorgan Chase (-2%).
The broader S&P 500 index has lost 1%, while the tech-focused Nasdaq is down 0.75%.
