Fed Chair Powell says he’s powerless to protect the economy if Congress lets the US default on its debt

Jerome Powell hearing
Fed Chair Jerome Powell.

  • Nobody should assume the Fed can save the US economy if Congress fails to raise the debt limit, Jerome Powell said.
  • If the ceiling isn’t raised, the US could default on its debt and enter a self-inflicted recession.
  • A debt-ceiling downturn is “just not something we can or should contemplate,” the Fed chair said.
  • See more stories on Insider’s business page.

The Federal Reserve won’t come to the economy’s rescue if the US defaults on its debt, central bank chair Jerome Powell said Wednesday.

Congress is, once again, coming dangerously close to a debt-ceiling crisis. Lawmakers have until mid-October to either raise or suspend the borrowing limit or allow the US to default on its debt. The latter outcome would freeze spending on several critical public programs, spark massive job losses, throw financial markets into chaos, and likely plunge the US into a self-inflicted recession.

In other words, defaulting on government debt is “just not something we can or should contemplate,” Powell told reporters in a press conference. Failure to raise the ceiling could spark “severe damage to the economy,” and the ball is solely in lawmakers’ hands, the Fed chair added.

“I think we can agree the United States shouldn’t default on any of its obligations and should pay them when due,” he said. “No one should assume that the Fed or anyone else can protect the markets or the economy in the event of a failure.”

Debt scares aren’t anything new to those on Capitol Hill. The ceiling has already been suspended or lifted 57 times in the last five decades. But the 117th Congress is on track to be the first to break the threshold.

Republicans have been adamant that raising the ceiling is Democrats’ responsibility alone. Senate Minority Leader Mitch McConnell reiterated his opposition to the effort on Wednesday, saying Democrats shouldn’t “play Russian roulette with our economy.”

On the other side of the aisle, Democrats are pinning the blame on Republicans’ past actions. Lifting the limit only allows the government to cover its past spending. After the GOP and President Donald Trump added roughly $8 trillion in debt through tax cuts and stimulus, Republicans “are threatening not to pay the bills,” Senate Majority Leader Chuck Schumer tweeted Wednesday.

Schumer and House Speaker Nancy Pelosi revealed on Monday a measure that would suspend the limit through December. Yet fervent GOP opposition, a fragile Democratic majority in the Senate, and a looming deadline stand in the way of its passage.

What’s at stake if the US defaults

As lawmakers barrel toward the threshold, experts have painted a dismal picture of what a US default would look like. The White House told state and local governments on Friday that failing to lift the ceiling would swiftly freeze funding for programs including Medicaid, the Children’s Health Insurance Program, and FEMA disaster relief. The resulting recession would prompt “economic catastrophe,” Treasury Secretary Janet Yellen added Monday.

Outside the White House, assessments have been even bleaker. Failure to lift or suspend the ceiling would power a downturn reminiscent of the 2008 financial crisis, Moody’s Analytics economists led by Mark Zandi said Tuesday. The US would shed nearly 6 million jobs, and the unemployment rate would leap to 9% from 5.2%.

The resulting market crash would also cripple everyday Americans. Stock prices would tumble more than 30% before recovering, the team said. Losses from the selloff would total $15 trillion in household wealth, according to Moody’s.

Such a slump would also come as the country remains mired in a COVID-slammed economy. The Fed held its ultra-accommodative policy intact on Wednesday, leaving key supports in place as 8.4 million Americans remain unemployed. Powell hinted that a pullback could start in November, but even then, it will likely take years for Fed policy to fully return to pre-crisis norms.

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Fed officials signal the reversal of emergency pandemic support might come soon

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Jerome Powell said the Fed is looking into how a digital dollar would work.

  • The Federal Reserve hinted Wednesday it might soon reverse its emergency asset purchases.
  • The purchases aided financial markets and supported the economic recovery since they started in March 2020.
  • If the recovery continues as expected, the Fed could start shrinking the purchases “soon,” the central bank said.
  • See more stories on Insider’s business page.

On Wednesday, the Federal Reserve inched closer to announcing its reversal of the pandemic-era support that’s aided financial markets throughout the crisis, signaling the pullback could arrive before the end of the year.

The Federal Open Market Committee held interest rates near zero and maintained the size of its emergency asset purchases after meeting on Tuesday and Wednesday. The ruling extends the ultra-easy monetary policy set by the Fed in March 2020 to prop up the US economy.

The central bank has long indicated it will keep its support in place until “substantial further progress” toward stronger inflation and maximum employment were met. The recovery has since made progress toward both targets and officials could soon start the process of retracting the policy aid, the Fed said in a Wednesday statement.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the central bank said.

The Fed has been buying at least $80 billion in Treasurys and $40 billion in mortgage-backed securities each month to support financial markets and ease monetary conditions. The purchases are the first policies set to be normalized, with interest rate hikes set to follow.

That tapering process is no easy feat. Financial markets largely expect a tapering announcement after the FOMC’s November meeting. Starting the process even later would suggest the economy isn’t as healthy as expected. And shrinking the purchases before the anticipated date could shock investors and trigger panic selling.

Fed Chair Jerome Powell noted in a Wednesday press conference the tapering process could be swift if the recovery holds strong. FOMC members could start shrinking the purchases as soon as their November meeting, and the taper could be completed just months later, Powell said.

“Participants generally view that, so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” he said, adding the committee hasn’t made a decision on the exact timing.

The criterion required for the Fed to consider rate hikes are much more stringent. The timing and pace of the upcoming taper won’t hint at when rate lift-off will arrive, Powell said.

FOMC

Economic projections updated by the Fed on Wednesday reveal the committee isn’t united in its rate-hike timeline. Half of its 18 members expect the first rate hike to arrive next year, with three expecting rates to climb above 0.5%. The other nine see near-zero rates lasting through 2022.

The median projections practically ensure a rate hike will arrive by the end of 2023, with all but one member expecting higher rates that year.

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US stocks slide from record highs amid concerns around the economic impact of rising COVID-19 cases

Traders work at the New York Stock Exchange in New York, the United States, Nov. 20, 2018.
New York Stock Exchange on Nov. 20, 2018.

  • US stocks slipped from record highs as investors grow more concerned about the surge in Delta variant cases.
  • Still, major indexes notched monthly gains, with the S&P 500 up for the seventh consecutive month.
  • “Stocks can’t go up forever,” a strategist said. “This reinforces our belief that in the event of a well-deserved pullback.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

US stocks slipped from record highs Tuesday as investors grow concerned about the economic impact of rising COVID-19 cases.

Consumer confidence data released on Tuesday fell to a six-month low, indicating that Americans have been less inclined to purchase big-ticket items. US consumers however were more willing to spend on travel and hospitality as lockdown restrictions ease.

The headline consumer confidence index fell to 113.8, worse than the 123 consensus estimate and downwardly revised 125.1 prior reading. Edward Moya, senior market analyst at OANDA, said the reading “should add to the worry that we are seeing the peak with the US consumer.”

Labor market data, meanwhile, is due out Friday. Deutsche Bank’s US economists expect the pace of hiring to slow after a strong July report.

Still, all three indexes notched gains for the month, with the benchmark S&P 500 ending higher for the seventh consecutive month – its longest winning streak since January 2018.

Here’s where US indexes stood at the 4:00 p.m. ET close on Tuesday:

Despite Tuesday’s downturn, US stocks have responded with optimism since Federal Reserve Chairman Jerome Powell last week signaled that tapering asset purchases and easing bond-buying could happen this year, but interest rates would remain low until 2023.

“Stocks can’t go up forever,” Ryan Detrick, LPL Financial chief market strategist, said in a note. “This reinforces our belief that in the event of a well-deserved pullback, it would be an opportunity to buy at cheaper prices.”

With a highly anticipated Federal Open Market Committee meeting next month, on top of the surging COVID-19 cases, investors should be on the lookout for some seasonal volatility in September, which is historically the worst month of the year for stocks, Detrick said.

“We remain in the camp that any weakness, should it occur, could be short-term and likely be contained in the 5-8% range,” he added. “This bull market is alive and well and we would view any potential weakness as an opportunity.”

Zoom plunged as much as 17% in early trading after the company forecast that its revenue will roughly flatline for the rest of the year.

Globalstar fell as much as 14% after Bloomberg reported that its satellite connection technology would not be included in Apple’s upcoming iPhone 13.

Allbirds, the direct-to-consumer sneaker company focused on sustainability, made the first steps necessary to go public on Tuesday with its S-1 filing with the SEC.

In the digital asset space, FTX.US, the American arm of crypto exchange FTX, announced it had acquired derivatives dealer LedgerX as FTX CEO Sam Bankman-Fried pushes crypto to embrace regulation.

The CEO of eToro, Yoni Assia, broke down the four factors the exchange looks at from customer interest to token liquidity. Meanwhile, the number of crypto breaches and fraud is on track to break records in 2021, a study by Crypto Head showed.

The 10-Year US Treasury yield edged up to 1.305%, from 1.284% in the previous session. Yields move inversely to prices.

West Texas Intermediate crude slipped 1.07%, to $68.47. Brent crude, oil’s international benchmark, slid 0.57%, to $72.99 per barrel.

Gold slightly fell 0.19% to $1,815.19 per ounce.

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Treasury Secretary Janet Yellen will reportedly back Jerome Powell for another term as Fed Chair

U.S. Federal Reserve Chair Janet Yellen (L) congratulates Fed Governor Jerome Powell at his swearing-in ceremony for a new term on the Fed's board, in Washington in this handout photo taken and released June 16, 2014. REUTERS/U.S. Federal Reserve/Handout via Reuters
U.S. Federal Reserve Chair Yellen congratulates Fed Governor Powell at swearing-in ceremony in Washington

  • Janet Yellen will support another term for Jerome Powell as Fed chair, Bloomberg reported Saturday.
  • Powell succeeded Yellen as the head of the US central bank.
  • Biden is expected make a decision in the coming days.
  • See more stories on Insider’s business page.

Treasury Secretary and former Chair of the Federal Reserve Janet Yellen will support another term for her successor Jerome Powell as head of the US central bank, according to a report from Bloomberg on Saturday.

Yellen made such comments to senior White House advisors, Bloomberg reported, citing people familiar with the matter.

Powell’s four-year term as Fed chair will end in early 2022. President Joe Biden, who has the responsibility of appointing the chair of the Fed, will reportedly make a decision on the matter in coming days.

Yellen, who was appointed chair of the Fed under President Barack Obama and then-Vice President Joe Biden, was appointed by Biden to the Treasury Secretary position. She thus presumably holds some degree of influence over the decision Biden will make.

The chair of the Fed is arguably the top economic policymaking position in the world as that person oversees the world’s largest and most influential economy. The chair, alongside other members of the central bank’s Federal Open Market Committee, plays a major role in setting interest rates and conducting asset purchases that provide liquidity to markets.

Powell, who was appointed by President Donald Trump in early 2018, has overseen the central bank and its policy during the economic mayhem caused by the coronavirus pandemic. As the world shut down and economic activity came to halt, sending unemployment rates to frightening levels, Powell and the FOMC cut interest rates to near-zero and started a mammoth quantitative easing program in which the country essentially buys its own debt. This has helped the economy and financial markets bounce back.

Now, the central bank is in the midst of deciding when, to what degree, and at what pace they will tighten monetary policy.

Some within the Fed, as well as some outside observers, believe the bank should start tapering asset purchases soon. Others take a more dovish stance, not wanting to risk an self-inflicted economic downturn. The next chair of the Fed, Powell or not, will have the difficult task of navigating the delicate economic environment.

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US stocks mixed after turbulent trading driven by Fed jitters and delta spread

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  • US stocks closed mixed after a choppy session as investors digested the prospect of Fed tapering.
  • The number of Americans filing for unemployment insurance dropped to a new pandemic-era low last week.
  • Oil prices fell for the sixth straight day; gold prices edged lower.

US stocks closed mixed on Thursday after a turbulent session as investors continue to mull tapering by the Federal Reserve towards the end of this year alongside a continuous surge in delta variant cases across the country.

The benchmark S&P 500 index fluctuated throughout the day but eventually closed higher. Technology shares, meanwhile, pushed the Nasdaq 100 up slightly, while the Dow Jones Industrial Average closed lower, dragged by energy and materials.

The US seven-day moving average of daily virus cases on Thursday surpassed 130,000 for the first time since February, according to data from the Centers for Disease Control and Prevention.

Here’s where US indexes stood at the 4:00 p.m. close on Thursday:

Minutes from the Federal Reserve’s July meeting released on Wednesday indicate that the central bank may start tapering asset purchases before the end of the year.

“The pandemic low [in jobless claims] could be met with some mixed feelings after the Fed minutes,” Mike Loewengart, managing director of investment strategy, at E-Trade Financial said in a statement. “Progress in the labor market is the missing piece of the puzzle for the Fed to set into motion.”

Loewengart added that while fewer people filing for unemployment is a positive indication, there still may be some trepidation as investors consider how this fits into the Fed’s plan of action.

“Keep in mind these numbers are backward-looking and things change quickly,” he added. “We’ve seen somewhat contradictory reads between ADP, jobless claims, and nonfarm payrolls, so market watchers kind of have to triangulate to get a signal.”

The number of Americans filing for unemployment insurance dropped to a new pandemic-era low last week.

Weekly jobless claims totaled an unadjusted 348,000 last week, the Labor Department said, lower than the 363,000 figure economists surveyed by Bloomberg expected. The print marked a fourth straight decline and places claims at their lowest level since March 14, 2020.

Robinhood slipped 10% after the popular trading platform said the boom in trading both in cryptocurrencies and equities could fade in the coming months.

Nvidia surged 8% after the graphics card manufacturer reported record second-quarter earnings results that surpassed analyst estimates.

Macy’s jumped as much as 22% to a more than two-year high after the department store chain posted second-quarter earnings that beat expectations and raised its guidance for the year.

US Treasury yields slipped, with the benchmark 10-year note hovering around 1.245%, after hitting a session high of 1.30%.

Oil prices fell for the sixth day, slumping to a three-month low on demand worries.

West Texas Intermediate crude was down as much as 2.12%, to $64.07 per barrel. Brent crude, oil’s international benchmark, dropped 2.04%, to $66.84 per barrel.

Gold was edged lower, down by 0.58%, to $1,777.18 per ounce.

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US stocks fall as investors fret over Fed tapering and economic recovery outlook

Stock Market Traders
  • US stocks fell Thursday as investors considered the impact of the Fed tapering asset purchases this year.
  • The number of Americans filing for unemployment insurance dropped to a new pandemic-era low last week.
  • Oil prices fell for the sixth straight day; gold was flat.

US stocks traded lower on Thursday, led by the Dow Jones industrial average, as investors fret over the possibility of tapering by the Federal Reserve towards the end of this year and mull the prospects for the economic recovery as Delta variant cases surge.

The Dow slipped nearly 200 points while the benchmark S&P 500 Index traded lower for the third straight third day.

Minutes from the Fed’s July meeting released on Wednesday indicate that the central bank may start tapering asset purchases before the end of the year.

Here’s where US indexes stood at the 9:30 a.m. ET open on Thursday:

The Fed, in response to the pandemic recession, began its bond-buying purchase more than a year ago in a bid to stabilize credit markets. But now, central bankers indicated that the employment benchmark they are observing to scale back support “could be reached this year,” according to minutes.

“The Federal Reserve should start taking away the punchbowl by tapering after the next strong jobs report, potentially as soon as early September,” Richard Saperstein, CIO at Treasury Partners, said in a note. “After some initial stock market volatility, the market will likely appreciate the Fed’s tapering.”

Saperstein added that market sentiment is growing less exuberant as it digests rising COVID-19 cases.

All eyes now will be on the high-profile annual Jackson Hole conference of central bankers from August 26-28. Some though, including economist Mohamed El-Erian, think this will offer little direction. Instead, El-Erian said he is looking to the Federal Open Market Committee meeting on September 22 for more signals.

US Treasury yields slipped, with the benchmark 10-year note hovering around 1.23% after hitting a session high of 1.30%.

In economic news, the number of Americans filing for unemployment insurance dropped to a new pandemic-era low last week.

Weekly jobless claims totaled an unadjusted 348,000 last week, the Labor Department said, lower than the 363,000 figure economists surveyed by Bloomberg expected. The print marked a fourth straight decline and places claims at their lowest level since March 14, 2020.

Oil prices fell for the sixth day. West Texas Intermediate crude was down as much as 3.06%, to $63.46 per barrel. Brent crude, oil’s international benchmark, dropped 2.87%, to $66.27 per barrel.

Gold was trading flat, down by 0.36%, to $1,787.14 per ounce.

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The Fed hints it’ll start reining in pandemic-era stimulus later this year

Federal Reserve
  • Minutes from the Federal Reserve’s July meeting reveal when it could start removing policy support.
  • Most participants saw reason to start shrinking the Fed’s emergency asset purchases later this year.
  • Still, members disagreed on the speed, schedule, and composition of tapering purchases.
  • See more stories on Insider’s business page.

There’s an end in sight for the Federal Reserve’s drastic economic support.

A majority of the central bank’s policymakers determined late last month the Fed could start reducing the amount of money it’s feeding into the economy as early as this year, minutes from the Federal Open Market Committee’s July meeting showed Wednesday.

“Most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes said.

The statement is the first to reveal any kind of timeline for the Fed’s tapering of the asset purchases that began at the start of the pandemic. Paired with near-zero interest rates, these measures were meant to promote borrowing and support financial markets.

Still, the minutes show just the first step toward adjustment.” The Fed isn’t any closer to formally announcing the reduction of their extraordinary support,” Ed Moya, senior market analyst at OANDA, said in a note, adding an announcement is most likely to land after the November FOMC meeting.

The shift in outlook was tied to progress toward the Fed’s two recovery goals. Fed Chair Jerome Powell had long said supportive policy would remain in place until “substantial further progress” was made toward above-2% inflation and maximum employment.

Attendees at the July meeting determined that criterion was “satisfied” for the Fed’s inflation goal, and “as close to being satisfied” for its employment target, according to the minutes. Because of that progress, several FOMC members noted that strong economic conditions warranted tapering its Treasury and mortgage-backed security purchases “in coming months.”

Fed still split on the details

The taper timeline didn’t receive unanimous backing. Several participants said a reduction in asset purchases should come early next year instead, noting the labor market hadn’t healed enough to warrant a pullback. Others felt that tapering shouldn’t happen “for some time” due to rising COVID cases and their effect on hiring.

And details around the Fed’s eventual tapering are scant. FOMC members laid out a “range of views” on how quickly they should shrink purchases. Some preferred completely ending asset purchases before the Fed lifted interest rates, while others argued reasons for tapering were different than reasons for raising rates.

Disagreements also emerged over which purchases should be tapered first. Most participants said shrinking the Fed’s buying of Treasurys and mortgage-backed securities proportionally was most effective. However, some said reducing MBS purchases more quickly made sense due to surging home prices. A handful of regional Fed presidents have raised concerns about the red-hot housing market in recent months and mulled a faster withdrawal of MBS purchases.

The FOMC next meets on September 21 and 22, meaning any policy change is still more than a month away. Powell will speak at the central bank’s annual symposium in Jackson Hole, Wyoming, which is scheduled to take place from August 26 to 28.

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Mohamed El-Erian says the stock market won’t react to tapering speculation until the Fed’s ‘Big 3’ starts to take it more seriously

Federal Reserve Vice Chairman Richard Clarida, Federal Reserve Chairman Jerome Powell, and John Williams, Federal Reserve Bank of New York CEO John Williams (L-R)
Federal Reserve Vice Chairman Richard Clarida, Federal Reserve Chairman Jerome Powell, and John Williams, Federal Reserve Bank of New York CEO John Williams (L-R)

  • Economist Mohamed El-Erian said the market has not reacted to tapering speculation because the Federal Reserve’s “Big Three” hasn’t directly discussed it.
  • El-Erian was referring to Fed Chair Jerome Powell, Fed Vice Chair Richard Clarida, and Fed New York CEO John Williams.
  • “The market is still conditioned by the notion that the Fed … will not taper,” he told CNBC.
  • See more stories on Insider’s business page.

Despite speculation that the Federal Reserve may tighten its monetary policies sooner than expected amid a robust economic rebound in the past months, the market has not reacted simply because the “Big Three” hasn’t spoken, according to Mohamed El-Erian on Monday.

“This migration to ‘let’s get going’ is from below,” El-Erian told CNBC Monday, referring to various Fed officials who have weighed in on the central bank’s asset purchases. “So as long as the ‘Big Three’ aren’t saying it, the market is not going to be listening to anything else.”

El-Erian was referring to Fed Chair Jerome Powell, Fed Vice Chair Richard Clarida, and Fed New York CEO John Williams.

“The market is still conditioned by the notion that the Fed … will not taper,” he told CNBC. “Why? Because it has been so influenced by what happened in 2013 the taper tantrum, from what happened in the fourth quarter of 2018 when the Fed was forced into a very embarrassing U-turn.”

The 2013 taper tantrum was when collective panic prompted US Treasury yields to spike while the 2018 reversal was when the Fed signaled several rate hikes for that year then slashed them to none.

The Allianz and Gramercy advisor has for months been reiterating that he thinks the Fed should have tapered already given the inflationary setup.

Still, El-Erian thinks little to no direction will be offered during the high-profile annual Jackson Hole conference of central bankers from August 26 to 28. As for the Federal Open Market Committee meeting on September 22, he is a bit more hopeful.

“I think it’s really important for the chair to regain control of the narrative, otherwise he’s going to have a very split FOMC,” he said.

El-Erian, who is also the president of Queens’ College, Cambridge University, did add that once the Fed does taper assets, he thinks the market will not collapse.

“You will get some pullback, and you should, because we are at bubblish levels in certain places because of this massive liquidity, but I don’t think this is a collapsed situation,” he told CNBC. “This is a ‘let’s get more sober’ situation.”

El-Erian then discussed the two biggest risks he sees in the market right now: a big policy mistake for “not doing anything” or a market accident due to excess liquidity.

“If you look at really what the big risk to the economies are it is if they do not taper because then you increase tremendously … the high likelihood of this policy mistake or market accident,” he said.

The central bank slashed rates to historic lows at the start of the pandemic to stimulate economic activity and has signaled its intention of keeping interest rates unchanged until 2023.

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The Fed knows skyrocketing home prices are a problem, but doesn’t know what to do about it

Condo for sale sign
  • Federal Reserve policymakers have an eye on surging US home prices, meeting minutes showed.
  • Some officials “saw benefits” to tapering mortgage-loan purchases to cool the red-hot market.
  • While members chose to hold policy steady, the minutes signal the Fed may want to curb home-price inflation.
  • See more stories on Insider’s business page.

Of the various items surging in price through 2021, homes are possibly the most extraordinary.

Price growth is the strongest it’s been in more than 30 years. While demand remains elevated, builders have struggled to bring more supply to market. America’s central bank played at least some role in this incredible price inflation.

The Fed’s emergency policies dragged mortgage rates to record lows and helped spark the sharp increase in homebuying. But as prices climb to dizzying heights, some experts have called on the Fed to rein in its support. Officials at the Fed are tuned in to the problem, minutes from the Federal Open Market Committee’s June meeting showed.

Several of the meeting’s participants “saw benefits to reducing the pace” of the central bank’s purchases of mortgage-backed securities, citing “valuation pressures in housing markets.” They also suggested tapering MBS purchases earlier than Treasury purchases, a move that would counter the Fed’s past signals.

The FOMC meeting ended with policymakers electing to hold rates near zero and keep buying at least $80 billion in Treasurys and $40 billion in MBS each month.

The outlook echoes comments made in recent months by a handful of Fed officials. Dallas Fed President Robert Kaplan said in May that MBS purchases could be having “some unintended consequences” that should be weighed against their benefits.

“We don’t want to get back to the housing bubble game that cost us a lot of distress in the 2000s,” St. Louis Fed President James Bullard said on CNBC in mid-June.

Other FOMC members, however, saw reason to stay the course. Several said synchronized tapering of Treasurys and MBS purchases would be preferable, since that “would be well aligned with the Committee’s previous communications,” the minutes showed. They also noted purchases of both Treasurys and MBS helped the Fed achieve its goal of easing financial conditions.

For the moment, any policy shifts are likely months away. FOMC participants agreed to continue assessing the housing market and discussing plans for eventual tapering. Fed Chair Jerome Powell has repeatedly said that “substantial further progress” toward the Fed’s goals of maximum employment and inflation averaging 2% was required for policy adjustments.

Officials generally agreed in June the threshold hasn’t yet been met, according to the minutes. For now, then, the Fed is set to keep house prices booming. But there’s a crack in their thinking.

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US stocks close mixed with Nasdaq near record as investors weigh new Fed guidance

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Deutsche Bank said retail investors have been key players in the stock-market rally.

US stocks closed mixed on Thursday as investors digested the Federal Reserve’s accelerated interest-rate-hike guidance. The Nasdaq closed near a record high, while the Dow Jones Industrial Average and the S&P 500 were down on the day.

Based on new projections from the Federal Open Market Committee, the US central bank will raise its benchmark interest rate two times in 2023.

“Overall, we characterize this meeting as being slightly hawkish, but not overly so, given the committee acknowledged the improving economic conditions, but remained steadfast on its approach to recent inflation data,” Calvin Norris, a US rates strategist at Aegon Asset Management, said in a statement.

Norris noted the eventual tapering of its quantitative-easing purchases after “substantial further progress” has been made in the economy.

The benchmark 10-year Treasury yield edged lower to 1.518% from Wednesday’s 1.569%.

On Wednesday, all three major stock indexes closed lower after the FOMC announcement.

Here’s where US indexes stood at the 4 p.m. close on Thursday:

GameStop could be one of the newest stocks on a list of the 1,000 largest companies thanks to the army of retail traders that have pushed the share price to dizzying highs. But AMC Entertainment might have just missed the cutoff.

In the digital-asset space, bitcoin was trading 3.35% lower at $37,796. The cryptocurrency has been trading sideways after its massive crash in May but reclaimed $40,000 this week. Last month’s massive sell-off slashed bitcoin’s market capitalization by almost 30% to $766 billion.

Mike Novogratz, Galaxy Digital’s CEO and a longtime cryptocurrency bull, said the true value of the bitcoin lies mainly in the community it has built and that it is valuable because people say it is. He also said Elon Musk’s eclectic tweets weren’t good for cryptocurrencies.

Meanwhile, Coinbase cofounder Fred Ehrsam said 90% of nonfungible tokens would eventually be worthless and that people shouldn’t dismiss dogecoin.

Oil prices slipped. West Texas Intermediate crude fell 1.29% to $79.22. Brent crude, oil’s international benchmark, ticked lower by 1.53% to $73.25 a barrel.

Gold dropped 2.27% to $1,777.04 an ounce. The precious metal tumbled on the Fed’s accelerated rate-hike projections.

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