Powell backs rate hikes; says financial risks contained

Powell backs rate hikes; says financial risks contained

In his speech to the New York Economic Club, Powell again stressed 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".

US President Donald Trump will also be interested in the statement, and he expressed his displeasure with Powell in an interview on Tuesday. So far, I'm not even a little bit happy with my selection of Jay [Powell for Federal Reserve Board chair].

"I'm doing deals, and I'm not being accommodated by the Fed", Trump told the Post.

After doing very little for the majority of the session, the AUD/USD jackknifed higher in North American trade, fueled by remarks from US Federal Reserve Chair Jerome Powell that raised fresh doubts about just how many rate hikes the Fed may deliver next year.

But the odds of a 0.25-point rise in March have fallen to 34% from 50% according to FactSet.

Do that and you won't have pesky interest rates or an inflation problem to worry about, Mr. President. For those reasons, this year's hikes have made the Fed the target of unusual public attacks from Trump - criticism that has accelerated with the past month's sharp declines in the stock market. Members of the Fed's policy-setting committee have estimated the neutral rate as anywhere between 2.5 per cent and 3.5 per cent - which means that the federal funds rate is, indeed, only another couple of quarter-point hikes away from entering that range.

In a speech to the Economic Club of NY on Wednesday, Federal Reserve Chairman Jerome Powell said interest rates are just below the range of estimates that would be "neutral" for the economy. Higher rates can put downward pressure on the economy, but often combat inflation.

However, he says, "Most of the rate adjustment that's priced into the market today has happened".

DeepVeer dazzle in ivory and gold ensemble for Mumbai reception
The photos of DeepVeer's reception have taken the internet by storm as both of them were looking royal, classy and adorable. Deepika has worn an Ivory and Gold Chikankari ensemble by designer duo Abu Jani- Sandeep Khosla .

Powell also commented on the Fed's Financial Stability Report, which assesses the risks in the banking system and the strength of the consumer balance sheet.

"Global central bank tightening (of rates) was probably the biggest risk that equity investors faced over the next four quarters, so having the Fed chairman come out and suggest they're nearly done is welcome news".

And Powell said the Fed's gradual increases balanced the risks between raising too much and not enough.

Powell seemed to think financial leverage and funding were fine, but acknowledged subtler risks from rising corporate debt load, especially since businesses with high leverage and interest burdens have increased their debt loads most of all.

Powell's comments appear to implicitly reject arguments from President Trump that past interest rate increases have been a mistake.

The report noted several signs of resilience in the financial system to the sorts of unexpected shocks that might arise, including the strong capital position of banks, generally tempered borrowing by households and a system less vulnerable to the sorts of runs or credit crunches that almost shut down the global economy in the 2007-to-2009 financial crisis.

He also said disruption caused by events such as Brexit might trigger economic distress.

Related Articles