Washington, February 06 (QNA) – US Stock Indices declined after the stronger than expected economic data and signs that the US Federal Reserve is not ready to declare victory over inflation yet, according to Bloomberg News.
The main indices on the New York Stock Exchange closed in decline at the end of yesterday’s trading, as the S&P 500 Index was down by 15.85 points, or 0.32 percent. The Nasdaq 100 Index lost 32.44 points, or 0.21 percent, and the Dow Jones Industrials Index fell by 285.71 points, or 0.74 percent.
Federal Reserve Chair Jerome Powell previously said that the central bank has shifted its focus toward deciding when to begin cutting interest rates, but that solid economic growth means officials dont have to rush that decision.
Bloomberg added that in another sign that the largest economy in the world is still standing on a solid foundation, the services sector expanded greatly in four months, noting that in January, the Services PMI registered 53.4 percent, 2.9 percentage points higher than December’s seasonally adjusted reading of 50.5 percent.
Bloomberg explained that this strong data reached the stock market at a time when traders were thinking carefully about the cautious views of Federal Reserve spokesmen. Jerome Powell told the CBS 60 Minutes program that Americans may have to wait beyond March for the central bank to cut interest rates as officials look for more economic data to confirm that inflation is headed down to 2%.
Last week, the US Department of Labor reported that the US economy added 353,000 jobs in January, nearly double the number economists had expected.
Given recent economic strength, “we feel like we can approach the question of when to begin to reduce interest rates carefully,” Powell said during the interview.
He added that officials were trying to balance the risks of leaving rates too high for too long, which could cause an economic slowdown, and of cutting rates too soon and allowing inflation to settle above the Feds 2% goal.
“There is no easy, simple, obvious path…..We think the economys in a good place. We think inflation is coming down. We just want to gain a little more confidence that its coming down in a sustainable way,” Federal Reserve Chair pointed out.
He repeated his view that the Fed wouldnt need to wait until inflation fell all the way to its 2% goal to begin cutting rates.
A year ago, many economists and some inside the Fed anticipated that the central bank would have to raise rates to levels that would likely lead to higher unemployment, risking a recession. However, economic growth has shown surprising resilience even as wage and price increases have slowed, suggesting officials might be able to achieve a so-called soft landing that avoids a sharp downturn
The Federal Reserve held its benchmark federal-funds rate steady last week in a range between 5.25% and 5.5%, the highest level in more than two decades. (QNA)