U.S. Treasury yields rise again following Powell's hawkish remarks

Jerome Powell, the chairman of the U.S. Federal Reserve (pictured), left open the possibility of an interest rate hike, dampening the market's expectations of an interest rate cut. The global financial market also experienced fluctuations, with the KOSPI collapsing below the 2,400 mark during the day due to Powell's “hawkish remarks” and worsening demand for U.S. Treasury bonds.

[The Fed] is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time; we are not confident that we have achieved such a stance," Chairman Powell said at a conference hosted by the International Monetary Fund (IMF). "The process of getting inflation sustainably down to 2% has a long way to go. If it becomes appropriate to tighten policy further, we will not hesitate to do so.”

After the Federal Open Market Committee (FOMC) maintained the benchmark interest rate on Nov. 1, the market has been raising expectations that the Fed will not only cease raising interest rates but expedite the pivot point to initiate interest rate cuts. Reflecting this sentiment, the Nasdaq index, centered on technology stocks, recently experienced a 9-day consecutive rise in the New York Stock Exchange, and U.S. Treasury yields plummeted.

However, Chairman Powell indicated on Thursday that additional tightening was not ruled out, and with the U.S. Treasury's government bond auction confirm‎ing weakening demand, interest rates on government bonds rose sharply.


Hyoun-Soo Kim kimhs@donga.com