Fed chairman: U.S. economy healthy and rate hikes arent automatic

Image Tim Arbaev iStock

Image Tim Arbaev iStock

America's economy is still growing robustly, but a string of possible outside shocks including President Donald Trump's protracted trade rift with China could trigger a downturn, according to a report released by the Federal Reserve on Wednesday.

Minutes of the November meeting show policymakers ticking off a series of issues, including a tightening of financial conditions, global risks, "and some signs of slowing in interest-sensitive sectors", that had begun weighing on their view of the economy.

Still, Mr. Powell's observation appeared to soothe anxious investors.

The meeting comes at a pivotal moment in the trade war between the world's two largest economies.

Analysts read that as a suggestion that Powell intends to be more cautious about hikes in rates. Trump has threatened to launch a third round of tariffs on $267 billion in Chinese goods if he and Xi fail to end their impasse.

"There is no preset policy", he said.

His remark then had unsettled investors who feared it signaled that the Fed would continue raising rates well into the coming months.

The Dow surged on the news and closed up 600 points, or more than 2%, in midday trading.

"Over the past year, firms with high leverage and interest burdens have been increasing their debt loads the most", Mr. Powell said.




Higher US interest rates tend to boost the dollar, making gold more expensive for holders of other currencies. On this count the market speaks loud and clear - Powell blinked and the Fed will be sensitive to market swings going forward. He has repeatedly bashed Powell, a Republican investment banker he appointed and described past year as a "wise steward".

In an interview this week with The Washington Post, Trump said he was not happy with Powell's support for further rate hikes.

Trump has complained that the Fed is threatening to undo the economic stimulus being provided by the tax cuts and that its rate hikes are unnecessary because inflation has remained relatively low.

Trump even added that sometimes decisions he makes with his "gut" matter more than what other people's brains tell him. This is probably because Fed Chair Jerome Powell stole most of the thunder the day before with his dovish remarks about the fate of future rate hikes.

"So, with a December rate hike and one or two more in 2019 that should be enough to put the Fed where they want to be". At the same time, Powell says the financial system and markets appear far sturdier than they did before the 2008 crisis.

In a speech that comes in the wake of another volatile market selloff, Powell offered few clues on how much longer the USA 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. Rather, we assume that Powell wanted to prepare the markets for a change in the central bank's communication.

Nor did the Fed and other major economic bodies see the "excesses" that led to the financial meltdown of 2008, instead claiming that the U.S. and world economy had entered a period of "great moderation". He said the Fed was "way off base with what they're doing".

The Fed chairman said the central bank is monitoring potential vulnerabilities in the banking system to ensure its continued stability.

Recommended News

  • TAPPED OUT: Tijuana Mayor Calls for 'ARREST' of Caravan Organizers, Cuts Funding

    TAPPED OUT: Tijuana Mayor Calls for 'ARREST' of Caravan Organizers, Cuts Funding

    Border patrol officials identified Mara Salvatrucha, a young man who was caught entering the US illegally, as a member of MS-13. The mayor of Tijuana added that whoever organized this migrant caravan needs to be held accountable and face criminal charges.
    Stormy end to month as Diana arrives with 70mph gales

    Stormy end to month as Diana arrives with 70mph gales

    The Iceland Met Office has issued a yellow weather warning for most parts of Iceland for tomorrow and until midnight on Thursday. A yellow weather warning highlighting strong winds and heavy rain was issued by the Met Office for eastern areas of the province.
    Kartarpur opening will not lead to bilateral dialogue, says Sushma Swaraj

    Kartarpur opening will not lead to bilateral dialogue, says Sushma Swaraj

    The Gurdwara was home to Guru Nanak Dev, one of the leaders of the faith for 18 years and he died there in 1539. Hailing his old friend's efforts, Navjot Singh Sidhu said, Imran Khan had become a key that can open all locks.
  • Macron mulls state of emergency to curb riots

    Macron mulls state of emergency to curb riots

    Speaking at Paris police headquarters, Mr Philippe said more than 5,000 protesters were on and around the Champs-Elysees avenue. In Paris , police said they had arrested nearly 300 people while 110 were injured, including 20 members of the security forces.
    Syria 'Shoots Down' Targets in Suspected Israeli Attack

    Syria 'Shoots Down' Targets in Suspected Israeli Attack

    The Israeli military denied any of its assets were hit but stopped short of denying it had conducted strikes at all. Israel has carried out hundreds of air strikes in neighbouring Syria against what it says are Iranian targets.
    Spider-Man: Into The Spider-Verse Getting Sequel Annd Spin-Off

    Spider-Man: Into The Spider-Verse Getting Sequel Annd Spin-Off

    Amy Pascal is producing the sequel and spin-offs, and Lord and Miller are expected to also return in a creative capacity. The script will be written by Bek Smith, who wrote episodes of the CBS series Zoo .
  • Scotts Against Brexit Deal: Scottish Parties Uniting Against Divorce from the EU

    Scotts Against Brexit Deal: Scottish Parties Uniting Against Divorce from the EU

    Asked which of those two options was more likely if her deal does not pass, she said: "We haven't had the vote yet". I've got a deal which delivers for the British people.
    Hyundai Palisade Arrives Ready To Haul Your Whole Family

    Hyundai Palisade Arrives Ready To Haul Your Whole Family

    To sum that up, the Palisade is supposed to be a premium, Korean-made package of practicality, comfort, and performance. The second row includes one touch seating to make it easier for kids to operate and for better access to the third row.
    Hearty handshake between Putin and Saudi crown prince goes viral

    Hearty handshake between Putin and Saudi crown prince goes viral

    The G20 summit in Buenos Aires will be the first major worldwide event Prince Mohammed has attended since Mr Khashoggi's murder. US President Donald Trump and his Chinese counterpart Xi Jinping are scheduled to have dinner together on Saturday.
  • Jet black box shows struggle of Lion Air pilots

    Jet black box shows struggle of Lion Air pilots

    The government report suggests the airplane should have been removed from service because of earlier reports about problems. That's one of the findings in a preliminary report released today by Indonesia's National Transportation Safety Committee .
    Nasa turns to private sector for next moon mission

    Nasa turns to private sector for next moon mission

    In some ways, the NASA program is a revival of the Lunar X Prize. "Our lander design has secured substantial private funding". We will remind, 49 years ago, American astronaut Neil Armstrong the first of the humans stepped on the lunar surface.
    Cavaliers trade Kyle Korver before matchup against the Thunder

    Cavaliers trade Kyle Korver before matchup against the Thunder

    The Jazz are sending the Cavs shooting guard Alec Burks and two future second-round picks in exchange for Korver . Burks is on a $11.53 million expiring contract, which could have value before the trade deadline.

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.