Fed hints at higher rates despite Trump attack

Jerome Powell gives testimony

His remarks were in stark contrast to comments he made in October when he said interest rates were a "long way" from a neutral level.

The Federal Reserve on Thursday paved the way for a fourth rate hike in December, but sent a clear signal to investors that it would exert greater flexibility with its plans to ratchet up interest rates in 2019. In an interview with the Washington Post this week Trump said he was "not even a little bit happy" with his selection for Fed chair.

In his speech to the New York Economic Club, Powell again stressed that there was "no preset policy path" for interest rates and said the central bank had moved gradually, since "moving too fast would risk shortening the expansion".

The Fed has raised interest rates every quarter this year. "There is a great deal to like about this outlook, " he said in a speech to the Economic Club of NY.

In a speech that comes in the wake of another volatile market selloff, Powell offered few clues on how much longer the US central bank would continue tightening policy but he did say the policy rate, at 2-2.25 percent, is now "just below" the broad range of estimates of neutral, which in September was 2.5-3.5 percent.

Factually, Mr Powell's remarks on Wednesday and in October are both true. Equity investors leapt to the same conclusion on Powell's speech, with the S&P 500 ending the day up more than 2 percent.

Former President George HW Bush dead at 94
He assembled a coalition of 32 nations to drive Iraqi forces out in a matter of weeks with a lightning air and ground assault. Another son, Jeb - a former Florida governor - made an unsuccessful bid for the Republican nomination in 2016.


But markets were focused less on such subtleties than on what Powell's assessment of where rates are means for the future path of rate hikes.

The Fed chair's latest statements come after a barrage of criticism from Trump.

The minutes did raise a number of worries about Trump's get-tough trade policies, which have levied tariffs on billions of dollars worth of imports from China and other countries and prompted retaliation against USA products. "However, several dealers noted that they perceived recent communication regarding the neutral policy rate and its role in informing monetary policy as being unclear or at times inconsistent with prior Fed communication", the survey said in the comments section. According to CME Group's FedWatch tool, the probability of a December rate hike rose today, while it declined for the meeting in March 2019. The Federal Reserve has been raising interest rates as the USA economy picks up. Powell and other Fed officials have since sounded a bit more cautious, nodding to a slowdown in Europe, Japan and China.

Just on Tuesday, Fed Vice Chair Richard Clarida, in a speech to numerous same economists and investors in NY, used precisely the same language to describe the policy rate as "just below" the range for neutral.

"Many baby boomers like me are, however, reaching an age where a good report is, 'Well, there are a number of things we should keep an eye on, but all things considered you are in good health, '" said Powell. "We will be paying very close attention to what incoming economic and financial data are telling us".

The central bank chief said his colleagues and many other economists "are forecasting continued solid growth, low unemployment and inflation near 2 per cent".

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