Published: Sat, December 01, 2018
Finance | By Jaime Brady

Powell hints at slower rate-hike pace

Powell hints at slower rate-hike pace

In language following that policy meeting, officials may convey "sufficient softening of future expectations", said Sprott's Reik, who's expecting the central bank to halt rate hikes next year.

But officials discussed changing their postmeeting policy statement to emphasize their flexibility to respond to fresh economic developments as they weigh their rate moves next year.

Federal Reserve Chairman Jerome Powell struck a generally optimistic note on Wednesday about the state of the US financial system and indicated that interest rates, while still low by historical standards, are near neutral, sending stocks higher.

Chairman Jerome Powell's Wednesday speech to the Economic Club of NY was hardly as hawkish as some had expected.

Traders believe the risk of fast-rising interest rates hurting the US economy and the stock market is now on the downside after Powell said monetary policy rate is now "just below" estimates of a level that neither brakes nor boosts a healthy economy. Powell, who took over as Fed chairman in February, has said he wants to provide the public with "plain English" descriptions of what the central bank is up to.

Jerome Powell has said the Fed's key rate is "just below" neutral.

US Federal Reserve chairman Jerome Powell may have given India an early Christmas gift.

The possible policy shift occurred at a meeting at which the Fed also resumed debate on how best to manage short-term interest rates in the future, a decision that could influence the final target size of the Fed's still-massive balance sheet. After mid-year, Ashworth said he expects that "a slowdown in economic growth to below potential forces (the Fed) to the side lines".

PSG's Neymar becomes highest-scoring Brazilian in Champions League history
A strong opening 15 minutes was capped off with a goal from Bernat , who finished after a Kylian Mbappe ball fell his way. With his goal, the PSG star moved past Kaka as Brazil's all-time leading scorer in the Champions League .

General Motors to slash jobs and production, drawing Trumps ire
GM closed a plant in Indonesia in 2015 and fired 500 workers after reportedly losing about US$200 million on the Chevrolet Spin. US President Donald Trump has escalated his attack on General Motors (GM) after the carmaker's announcement of major job cuts .

Mauricio Pochettino: Tottenham have the belief and faith to win in Barcelona
With Tottenham facing early Champions League elimination, Christian Eriksen came to the rescue against Inter Milan . Tottenham must still beat Barcelona on December 11 at the Camp Nou to make sure of advancing to the knockout phase.

Nearly all participants at the November 7-8 meeting believed another rate increase "was likely to be warranted fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations", the minutes said.

As a result, "almost all" Fed members said a rate hike "was likely to be warranted soon". The two-year Treasury yield-most reflective of the Fed rate policy-fell to 2.79% after an earlier high of 2.85%.

Tom Porcelli of RBC Capital Markets said investors were wrong to interpret Powell's words as "dovish".

Some policymakers agreed with the idea of further rate increases, but also "expressed uncertainty about the timing".

After lift-off in December 2015 followed by a rise a year later, the central bank has since steadily raised benchmark rates and is widely expected to do so again in December. But that approach is no longer appropriate, Powell said. "And I'm not blaming anybody, but I'm just telling you I think that the Fed is way off-base with what they're doing".

We also know that moving too slowly - keeping interest rates too low for too long - could risk other distortions in the form of higher inflation or destabilising financial imbalances. Bloomberg Economics anticipates three increases.

Neither Clarida nor Powell said definitively whether rate hikes should stop at neutral, and each stressed that level was very hard to estimate.

The continued strength of the American economy has made it more likely that the Fed will stick to its plans to raise rates in December, as part of its strategy to keep growth on an even keel into 2019.

Like this: