Already-jittery US stock markets shot lower on Thursday following another remark from Federal Reserve Chairman Jerome Powell.
The central bank chief has been unusually outspoken in recent weeks with comments that seemed to be geared at calming nervous investors but an offhand comment at an event Thursday had the opposite effect.
On Wall Street, after five days of gains, the benchmark Dow Jones Industrial Average dropped more than 250 points from the day’s high after Powell said the Fed’s large securities holdings should be “substantially smaller” than the current level of just under $4 trillion.
Despite his largely upbeat view on the US economy, and clear signals the Fed will be patient about raising interest rates any higher — statements that helped equities to recovery — markets focused on those two words.
Investors worry about that selling off the Fed’s securities will tend to raise borrowing costs, even if the Fed’s benchmark lending rate is unchanged.
The market recovered most of the lost ground by 1940 GMT but it does not take much for investors to run for the exits, with markets already on edge amid concerns the global economy is slowing just as interest rates are rising and uncertainty about the US-China trade war.
Powell roiled markets in early October when he indicated several more rate increases were likely, and since then he and other senior officials have come out multiple times with more soothing comments.
The Fed chief on Thursday again stressed that policymakers could take time to evaluate the economy before deciding on any additional rate moves.
Asked about the expectations for the Fed’s policy meeting later this month, Powell said, “You should anticipate we are going to be patient and watching and waiting and seeing.”
Starting after the January 30 announcement, Powell will hold a press