U.S. Federal Reserve Chair Jerome Powell indicated Friday morning that the central bank isn’t done hiking, and it won’t be in any rush to cut rates after its tightening cycle.

In a speech at Jackson Hole, Wyo., Powell said the “U.S. will likely require restrictive policy for some time” and added “history cautions against ‘prematurely’ loosening policy.”

Philip Petursson, chief investment strategist at IG Wealth Management, said Powell’s speech was “perhaps more hawkish than what the market had hoped.”

“I think that [Powell’s speech] sets the stage for the Bank of Canada to continue to be as aggressive as they’ve been, even though I think the Canadian economy is potentially in a worse off situation than the U.S., because of the direct impact of the housing market,” Petursson said in a phone interview Friday.

“I think the Bank of Canada is going to follow the U.S. Fed for now.”

Bank of Canada Governor Tiff Macklem is set to deliver the next interest rate decision on September 7.

Petursson said hiking three-quarters of a point “is a certainty for the Bank of Canada,” but he added there’s a risk the central bank could increase by another full point.

 

PROTECTING YOUR INVESTMENTS 

Royce Mendes, managing director and head of macro strategy at Desjardins Group, said Powell’s speech indicates we could be heading for another “season of volatility.”

“Powell said there is more pain to come for businesses and households. Reading between the tea leaves, I think he's prepping markets and the public for the possibility of a recession,” Mendes said in a phone interview Friday.

“Heading into recession I think you want to be cautious of risk tolerance. You have risk assets contained in your portfolio, but you also want to be relatively diversified and have a long-term view of the market.”

With the chance of interest rates continuing to climb in both Canada and the U.S., Petursson said investors should think about inflation protection.

“Now, that's not real return bonds, I think it continues to mean that you should have a healthy exposure to commodities and other asset classes that tend to move higher with inflation,” Petursson said.