The S&P/ASX 200 Index (ASX: XJO) is enjoying a welcome day of gains, up 0.56% in late afternoon trade on Monday.
The ASX 200 is joining most major Asian exchanges in the green today, despite some potentially unsettling signals from US Federal Reserve chair Jerome Powell.
Powell addressed global central bankers on Friday (Saturday Aussie time) at their annual gathering in Jackson Hole in the US state of Wyoming.
And he left many investors with more questions than answers as to what to expect next on the interest rate front in the world's top economy.
Should ASX 200 investors expect more rate increases from the US Fed?
Before Powell's speech on Friday, consensus forecasts were to expect one more interest rate hike from the Federal Reserve.
Following that speech, some analysts are now forecasting two more rate hikes before the Fed feels it has inflation under control. Other market watchers are sticking to just one more rate hike. And a few optimistic analysts believe the end of the tightening cycle has already arrived.
Yet the ASX 200 is showing resilience today, rising despite all this uncertainty.
That uncertainty, to be fair, isn't really Powell's fault.
Inflation in the US has come down sharply over the past 12 months.
But at 3%, it remains above the Fed's target range of 2%.
And the US economy has been defying predictions of a slowdown. Despite the Fed ratcheting up interest rates over the past 18 months to the current range of 5.25% to 5.5%, the US economy grew 2.4% in Q2. And unemployment remains at historic lows, though there have been signs that inflationary wages pressure is easing.
With inflation his number one concern, Powell called the retrace from peak levels "a welcome development" while noting inflation still "remains too high".
Sending a few jitters through the markets, Powell said the Fed's work to bring inflation back to its target range "still has a long way to go, even with the more favourable recent readings".
According to Powell:
We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.
Further fuelling uncertainty as to what global and ASX 200 investors can expect next, Powell also said, "Given how far we have come, at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks."
This came as he also said that this data "could warrant further tightening of monetary policy".
Commenting on the outlook for further rate hikes from the Fed, chief US economist at High Frequency Economics Rubeela Farooqi said (courtesy of Bloomberg):
Overall, the message remains that the Fed has delivered a lot. But inflation – even as it has abated – remains too high. And now policymakers are aware of the risks related to resilience in economic activity and are prepared to do more, if needed.
Another rate hike, perhaps even two, cannot be ruled out although the decision ultimately will depend on the totality of incoming data.
ASX 200 investors can expect more clarity on what's ahead for rates in the world's biggest economy when the Federal Open Market Committee meets again on 19 and 20 September.
