Instant View: Powell says rate hike moderation may come by December

NEW YORK (Reuters) - The Federal Reserve could scale back the pace of its interest rate hikes as soon as December, Fed Chair Jerome Powell said on Wednesday, while cautioning the fight against inflation was far from over and that key questions remain unanswered, including how high rates will ultimately need to rise and for how long.

Powell, in remarks prepared for delivery at the Brookings Institution think tank in Washington, did not indicate his estimated "terminal rate," but said it is likely to be "somewhat higher" than the 4.6% indicated by policymakers in their September projections.

Curing inflation "will require holding policy at a restrictive level for some time," he said.

US stocks turned higher on his comments, while Treasury yields fell back and the dollar turned lower.

MARKET REACTION:

STOCKS: S&P 500 gained 42.28 points, or 1.07%, to 3,999.91 BONDS: U.S. Treasury 10-year note rose 11/32 to yield 3.7069%, down from 3.748% late on Thursday.FOREX: The euro turned 0.48% higher and the dollar index fell

COMMENTS:

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY

    "You can't keep raising rates as quickly as they were doing it. That said, investors always like the comfort of hearing it directly from the chair. More than that, I think (investors) are starting to get a little more comfortable with investing at rates at this level... Investors have gotten to the point now where they are looking to come back into the market. So I think that's why you're seeing the initial reaction is positive. The thing you always have to remember with the Fed is that it's a dynamic situation, and they respond as events occur."

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, CHARLOTTE, NC   

    "The market is taking this glass-half-full, it could've been worse approach. Powell didn't really say anything that new."

    "The path of least resistance since the last inflation number has been higher. There's momentum to the upside in place until something outright stops it."

    "Policy continues to tighten. People are just not appreciating it because even if the Fed were to pause when they get to 5% you still have a balance sheet that continues to shrink. The balance sheet is almost as important if not more important than the level of rates."

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