Markets try to read tea leaves in Fed’s messaging

SINGAPORE - United States Federal Reserve chairman

Jerome Powell’s testimony

to the House Financial Services Committee and the decision by the Bank of England (BOE) to hike up its rate by a higher-than-expected 50 basis points factored heavily on market sentiment during the past week.

While Mr Powell stressed that lowering inflation back to the Fed’s 2 per cent target had a long way to go, his tone and use of words suggested a moderation of the central bank’s hawkish stance on rates. Markets read it as a likelihood of a 25 basis points hike in July followed by a pause, rather than the Fed’s dot plot suggestion of two more hikes in 2023.