"Inflation Cannot Be Ignored"
Discussion Expected at This Month's FOMC Meeting
Plan to Advance June Next Year End Date
Financial Market Volatility Expected to Continue for a While
[Asia Economy New York=Special Correspondent Baek Jong-min, Reporter Lee Min-woo] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), has signaled an early end to tapering (reduction of asset purchases). Despite the Omicron COVID-19 variant, his hawkish remarks that inflation can no longer be ignored caused the U.S. stock market to fall weakly, reversing the rebound from the previous day.
On the 30th of last month (local time), Powell appeared before the U.S. Senate and stated, "At this point, the economy is very strong and inflationary pressures have increased," adding, "Therefore, in my view, it would be appropriate to conclude the tapering announced in November a few months earlier." He specifically indicated that the expansion of tapering would be discussed at the December Federal Open Market Committee (FOMC) regular meeting.
Although Powell had mentioned the increased uncertainty in the U.S. economy and inflation due to Omicron the day before, on this day he withdrew the view that inflation was temporary and said it was appropriate to discuss early tapering. Powell assessed that "the risk of inflation spreading more broadly and persisting has increased," and also said, "I will not use the term 'transitory' for inflation."
Following Moderna CEO St?phane Bancel's expression of skepticism about the existing vaccine's defense against Omicron, Powell's remarks added to the weakness in the U.S. stock market. On that day, the Dow Jones Industrial Average fell 1.86%, the S&P 500 dropped 1.90%, and the Nasdaq Composite declined 1.55%.
On the 1st, the Korean stock market showed mixed trends. The KOSPI rebounded more than 1% intraday, recovering from the previous day's sluggish mood. In contrast, the KOSDAQ showed a weak performance.
Experts predict that volatility will continue for some time due to increased uncertainty. Gregory Daco, Chief U.S. Economist at Oxford Economics, explained, "Market uncertainty is spreading due to the Omicron variant and the Fed's hawkish turn." A foreign media outlet also evaluated that "global stock markets took a one-two punch from Omicron and Powell's speech."
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