Fed messages are effective in global markets

While Atlanta Fed President Bostic said that inflation in the US is on the path to the 2 percent target, Fed Governor Bowman predicted that this level could be reached with current interest rates. While the recent rally in technology stocks is being followed in global markets, inflation data to be released in the US and China this week is expected. Asian stock indexes are in the red following the increases experienced on Wall Street on Monday and signals from the People's Bank of China that monetary easing steps including the required reserves step may be taken. Japan's Nikkei 225, which returned from vacation, closed at a 34-year high. In the US, the S&P 500 closed up 1.4 percent and the Nasdaq 100 closed up 2.2 percent, but are slightly in the red in futures. The US 10-year bond yield has seen limited declines in two days and is at 4.01 percent. In the morning, the Bloomberg Dollar Index is at 1,221. “US inflation on path to 2%” Atlanta Fed President Raphael Bostic said that inflation in the US fell more than expected and is moving towards the 2% target, but that it was still too early to declare victory. “We are on the path to 2% today,” Bostic said, adding, “Our goal is to stay on that path.” Bostic said, “We are in a very strong position right now,” but added that policy makers could continue to allow monetary policy to remain restrictive. On the other hand, Fed Governor Michelle Bowman predicted that inflation could fall to the Fed’s 2% target while maintaining current interest rates and said she would support cutting interest rates if price pressures disappear. “If inflation continues to approach our 2% target over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive,” Bowman said, adding, “We’re not there yet.”