Wall Street Today | Powell Says FOMC is Close to Cutting Rates

The market watched Federal Reserve Chair Jerome Powell testify before a Senate committee Thursday, and not much else happened. Powell said the FOMC was close to deciding on a rate cut and that there would likely be cuts this year. Stocks advanced on the FedSpeak, and the S&P 500 to a new record close at 5,157.

Sometimes, the dance floor needs a song everyone has already heard to keep the party moving.

All three also rose the previous day following Powell's comments. Japan's yen rallied against the dollar, and the Nikkei 225 fell, amid growing confidence that the Bank of Japan could soon tighten monetary policy.

Thursday, morning, the European Central Bank cut its inflation forecast for this year and next and held interest rates steady. ECB President Christine Lagarde signaled officials would likely wait until June to be confident enough to start cutting rates.

Bitcoin traded around $67,000, but a little changed from Wednesday afternoon. Gold extended its climb. Front-month futures climbed to around $2,161 a troy ounce.

Federal Reserve Chair Jerome Powell told lawmakers the central bank was "not far" from being able to cut interest rates and that rates were far above levels that might be anticipated during periods of mild inflation and moderate growth.

Powell repeated Thursday that the central bank was looking for greater confidence that inflation was returning to its 2% target. Still, he went one step further during his second day of testimony on Capitol Hill by qualifying how soon the Fed might get there.

"When we do get that confidence, and we're not far from it, it will be appropriate to dial back" interest rates to avoid tipping the economy into a recession, he said.

Powell had signaled earlier that the Fed wasn't considering a rate cut at its next meeting, March 19-20, which has shifted attention to whether the central bank might be able to cut rates around the middle of the year.

Powell also said interest rates "now are well into restrictive territory." Central banks sometimes judge their interest-rate stance against estimates of a so-called neutral rate that might be expected when supply and demand are at equilibrium in the economy.

Rates are "well above neutral," he said. "We're far from neutral now."

The Nikkei 225 fell below 40,000, and the yen surged after data showed accelerating wage growth in Japan, boosting the prospects that it will soon end its negative interest-rate regime.

Japan's labor ministry said wage growth was 2% year-over-year in January, up from 0.8% in December.

That boosted the 2-year Japanese yield to as high as 0.20%, the highest in more than a decade. The yield slumped 1.2% to 39,598.71, ending its brief spell above 40,000, as the dollar slumped against the Japanese yen.