The inevitable revealed itself Friday as Federal Reserve Chairman Jerome Powell said in a speech at the central bank's annual retreat in Jackson Hole, Wyoming that a gradual rate hike is to be expected-a common notion felt in the US capital markets.
The benchmark S&P 500 and the Nasdaq hit all-time highs after Powell's comments at an annual meeting of central bankers did little to change market expectations of an interest rate hike in September and perhaps again in December.
The risk of surge in inflation remained low, Mr Powell said. The economy is strong and the Fed must walk a tight line between not snuffing out growth and not allowing an overheated economy to produce runaway inflation. But inflation has just risen to the Fed's 2 percent target range after years of low levels, and does not appear to be accelerating.
Though he did not directly address the geopolitical turmoil, Powell did say that if strong growth in income and jobs continues, further gradual increases for the federal funds rate will "likely be appropriate". He is due to speak on monetary policy later Friday.
European stocks look set to open largely unchanged on Friday as trade talks between the USA and China ended without progress, raising concerns that a prolonged trade spat could hurt global growth.
Europe's oil and gas stocks index .SXEP rose 0.7 percent on the day, after a government-appointed commission in Norway recommended the country's trillion-dollar sovereign wealth fund continue to invest in the sector.
Yesterday, the domestic currency had lost 30 paise to end at 70.11 against the greenback due to renewed worries about a hike in USA interest rates and rising global trade war jitters.
The Kansas City Fed's annual conference here in Grand Teton National Park is among the central bank's higher profile annual events, drawing global media attention and an audience including representatives of other nations' central banks. "It has to be the bearer of bad news during good times and tighten in order to avoid sharp upticks in inflation", he said. "Fed policy should not have anything to do with politics", said Schoar, who is also attending the Jackson Hole conference.
USA stock index futures pointed to a higher open on Friday, as investors awaited a speech from Federal Reserve Chair Jerome Powell for clues on the direction of monetary policy. Where he stands on the pace of interest rate hikes will be scrutinised after minutes from the Fed's most recent policy meeting indicated the central bank would tighten monetary policy soon. The bank made a total of seven rate hikes since December 2015, three coming a year ago.
Long-dated bonds are meanwhile being supported by restrained inflation and demand by foreign central banks that are continuing bond purchase programs.
His words reinforcing the Fed's plan to gradually raise rates seemed to have reassured investors.
To emphasize the Fed's attention to inflation, Powell borrowed a line that European Central Bank President Mario Draghi used in July 2012 to preserve the euro.
The Fed often walks a delicate tightrope in setting interest rates as it balances its dual mandate of promoting full employment and maintaining stable prices.