During morning trading, the Dow Jones industrial average rose by 50 points or 0.17 percent. The S&P 500 increased by 0.3 percent while the tech-heavy Nasdaq ticked up by 0.7 percent.
Oil prices sank after the White House signaled a new plan to cool soaring fuel prices, which have been hovering a national average near $5 a gallon. On Wednesday, President Biden will urge Congress to suspend the federal gas tax of 18.3 cents per gallon for three months. He will also call on states to suspend their own gas taxes and ask oil companies to lower prices.
Brent crude, the international benchmark, dropped 4 percent to near $109 a barrel Wednesday. West Texas Intermediate crude, the US benchmark, dropped 4.5 percent to $104 a barrel.
Powell said during the testimony that because oil prices are set globally and “there’s really not anything” the Fed could do to change the prices. He doesn’t, however, expect that the interest rate hike would bring down gas prices.
Powell reiterated that the inflation in the US is a result of rising demand following the pandemic. The interest rate hike, as a result, will reduce spending as borrowing becomes more expensive to consumers and businesses. In response to recession concerns, Powell acknowledged that “it was certainly a possibility.” However, he said that even with the increase, the interest remains at a “relatively low level.” Powell expected more hikes of three quarters of a percentage point, but it’s unclear how many of the future rate hikes will come in at that level.
In the bond market, yields on the benchmark US 10-year treasury fell by 0.16 to 3.145 percent. Yields move in opposite directions to bond prices.