Federal Reserve Chairman Jerome Powell provided new comments to the Senate Banking Committee while speaking about the state of the U.S. economy. The central bank’s leader said the economy remains strong, leaving little room for the Fed to lower interest rates. Powell believes it could be months before interest rate cuts are back on the table.
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This makes sense as inflation has remained sticky lately. While inflation is cooling, it’s at a very slow rate, and interest rate cuts could cause it to rise again. This would run counter to the Fed’s plan to get inflation back down to 2%.
Powell commented that with the Fed’s “policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance.” He warned that “reducing policy restraint too fast or too much could hinder progress on inflation.” Additionally, “reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
How Jerome Powell’s Comments Affected the Stock Market Today
Fed Chair Powell’s comments initially dropped the stock market this morning. However, that fall didn’t last long before the market recovered. This is a sign that investors are optimistic about the market in 2025, even without further interest rate cuts from the central bank.
How to Play the Stock Market on Powell’s Comments
Keeping interest rates as they are affects stocks in several ways. That includes boosting bank stocks, which typically perform better when interest rates are higher. One category that suffers under increased interest rates is growth stocks, many of which are in the tech sector.
Sticking with bank stocks, investors might wonder what the best investment opportunities are in the sector. The TipRanks stock comparison tool shows Bank of America (BAC) is a powerful option with its Strong Buy rating and $52.86 price target, representing an upside potential of 12.68% for BAC stock. US Bancorp (USB) is another solid option with its Moderate Buy rating and $58.21 price target with an upside potential of 22.21%.
