Published: Fri, November 30, 2018
Money | By Ralph Mccoy

Powell's 'just below' comment seen as suggesting fewer rate hikes

Powell's 'just below' comment seen as suggesting fewer rate hikes

Jay Powell, chairman of the Federal Reserve, appeared to signal a nearer end to the USA central bank's interest-rate hikes yesterday, saying rates are now "just below" estimates of neutral, less than two months after he said they were probably "a long way" from that point.

Speaking to the Economic Club of NY, the chairman also suggested that interest rates appear to be just below the level the Fed calls "neutral", where they are thought to neither stimulate growth nor impede it.

The possibly dovish shift in language on Wednesday came as President Donald Trump stepped up attacks on Powell, criticizing the Fed's rate hikes as undercutting his economic and trade policies. On Tuesday, Mr Trump stepped up his criticism, saying that he was "not at all happy"...

Markets are now trying to divine Powell's plans from data pulling in two directions - rising wages that could be a precursor to inflation, for example, compared to slowing growth and falling oil prices that may keep inflation down, or other indicators clouding the picture.

U.S. Federal Reserve (Fed) said on Thursday that nearly all Fed policymakers expected another interest rate hike "likely to be warranted fairly soon".

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Futures pointed to a small opening loss for the S&P 500 after the benchmark index ended slightly lower on Thursday to snap a three-day winning streak. They offered few explicit clues, however, as to how many hikes he thinks will be necessary in 2019. "This was again on display today", RBC Capital Markets chief US economist Tom Porcelli wrote in a note.

Traders work on the floor of the New York Stock Exchange in New York on November 28, 2018. Fed officials next meet December 18-19, and futures traders are pricing in a more than 70 percent probability of another quarter-point increase in the range for the key short-term rate, which would be the fourth hike of 2018.

But markets, especially after the recent selloff, were focused less on such subtleties than on what Powell may have telegraphed about the future path of rate hikes. The rise in Treasuries pushed down the yield on 10-year notes as low as 3.04 per cent, from 3.07 per cent before Powell's speech. But after that, officials said further hikes would not be on a preset course.

The Fed raised its benchmark rate in March, June and in September, with the last increase putting it in a range of 2 per cent to 2.25 per cent.

On Wednesday Powell said the Fed is paying "very close" attention to economic data even as it expects continued "solid" growth, low unemployment and inflation near its 2 percent target.

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