European stock markets closed lower on Thursday and extended the bearish trend on Friday as Federal Reserve Chairman Jerome Powell said historic policy shift would move inflation rate higher in the days to come.

The chairman claims that big changes in monetary policy to support economic recovery would increase inflation numbers. Powell expects the inflation rate to stand above 2%. The Fed is also not inclined to an interest rate hike until the unemployment numbers reduce to the pre-pandemic level.

“We are certainly mindful that higher prices for essential items such as food, gasoline, and shelter add to the burdens faced by many families, especially those struggling with lost jobs and incomes,” Powell said.

“Many who had been left behind for too long were finding jobs, benefiting their families and communities, and increasing the productive capacity of our economy,” Powell said. “It is hard to overstate the benefits of sustaining a strong labor market,” he added.

The Fed chairman forecasts unemployment to stand above 9% in the second half of this year. The unemployment claims have been declining at a robust pace in the US over the past couple of quarters.

US stock market soared to a new record level after Powell’s policy statement, with financials outperforming the rest of the S&P 500 sectors.

European stock futures are in the red on Friday after reporting losses on Thursday. The market analysts believe the European stock market is likely to gain momentum in the coming days amid easing social distancing policies along with a tourism industry recovery. However, analysts say the sustainable rally in European currency could make its products expensive for global consumers.

What Does it Mean for Investors?

  • US stock market futures are in green.
  • The gold price soared to $1950.
  • USD index fell broadly amid prospects for higher inflation numbers.
  • Euro grew against the US dollar.