US interest rate signal from Fed Chairman’s latest statement

Powell’s remarks sparked speculation that the Fed is considering a possible halt in interest rates in 2019.

FED Jerome Powell

Federal Reserve Chairman Jerome Powell said Nov. 28 that the base rate of the dollar was “just-below” “neutral” – a softening signal than before. This raises speculation that the Fed is considering a possible halt in interest rates in 2019.

According to Bloomberg News, the word “close to” that Powell describes as interest rates is an easing of last month’s remarks – which the market views as a signal that the Fed will tighten monetary policy. more fierce. Speaking on Oct. 3, Mr Powell said: “We can go through neutral, but at this point we are far from neutral, perhaps.”

The “neutral” interest rate, as defined by the Fed, is an interest rate that does not stimulate economic growth but does not exert downward pressure on growth.

In the New York Economic Times’s Wednesday speech, Powell said the Fed’s benchmark interest rate was “close to what was expected to be neutral for the economy, meaning that it would not accelerate or slow down.” slowdown growth “.

US stocks rose sharply after the announcement. US bond yields fell on rising bond prices. The dollar fell sharply.

According to some analysts, the latest statement from Powell may be a signal that the Fed will raise rates only once in 2019.

However, the Fed is expected to raise interest rates in December this year. Currently the basic interest rate of the US dollar is around 2 to 2.25%.

Mr. Powell once again emphasized that the Fed’s interest rate path would depend on economic data in the coming years.

“We all know that the economic impact of our gradual increase in interest rates is unpredictable, and may take a year or more to fully materialize,” he said. “Our intentions are based on the best forecasts for growth prospects, so there is no set path for policy.”

Prior to Powell’s speech, many investors became suspicious of the possibility that the Fed could raise interest rates three times in 2019 as the central bank expected, by the US economy and the world. There are signs of slowdown due to the impact of the US-China trade war.

“Our monetary policy decisions are always made to keep the economy going in the right direction, in line with changing employment and inflation expectations,” Powell said.

Despite consensus on the Fed’s ability to raise interest rates in December, economists have different views on the Fed’s rate hikes next year. Goldman Sachs and JPMorgan Chase forecast the Fed to raise interest rates four times in 2019, while Morgan Stanley and Citigroup forecast two increases. Bloomberg Economics analysts expect the Fed to raise interest rates three times in the coming year.

The Fed still thinks that the US economic outlook is good. “My colleagues and I, like many private sector economists, are forecasting steady growth, low unemployment and near-2% inflation,” said Powell. in the speech.

The announcement was made the day after President Donald Trump again criticized the Fed for raising interest rates. Mr. Trump told the Washington Post that he was “not even happy” with his choice of Mr. Powell as head of the Fed.

For his part, Jerome reiterated he would not be influenced by political pressure and would continue to focus on the Fed’s mission. Two people questioned Powell at the Wednesday event, but none of them asked him about Trump’s complaints.

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