Markets advance after Powell's `just-below' neutral remark

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Stocks had also rallied Wednesday after Fed Chairman Jerome Powell said interest rates were already close to estimates of "neutral" - the rate which neither accelerates not restrains economic activity - meaning they might not have to rise much higher.

"Powell is not suggesting that since they are just below the range they may stop soon".

Mr. Powell didn't provide any more guidance on the likely path for rates, and he noted they remain low by historical standards.

How long the market's new love for Powell lasts will be tested in just a few weeks' time when Powell speaks following the Fed's next policy meeting, scheduled for December 19. Why should he? The data for the United States economy remains strong.

Factually, Mr Powell's remarks on Wednesday and in October are both true. Investors interpreted his remarks as evidence that the Fed might consider pulling back from quarterly rate hikes. "I would be prepared for increased volatility in Dollars exchange rates".


While markets still expect a rate hike in December, Mr Powell said, "there is no preset policy path". Those increases have raised its benchmark rate to a still-historically-low range of 2 percent to 2.25 percent.

His clarification Wednesday didn't otherwise indicate any substantive change in the Fed's policy plans.

Did the Fed Chair blink after Trump's attacks? He will have an opportunity to do that next week in testimony on Capitol Hill.

Minutes of the November 7-8 meeting of the Fed's rate-setting body, the Federal Open Markets Committee, show that officials expressed concerns about a variety of threats, including the impact of tariffs, a slowing global economy and tightening financial conditions amid falling stock prices.

And some economists say the markets misread Powell. Investors have overreacted to relatively nuanced comments from Mr Powell in the past, and it is possible some misread his comments by believing he was telegraphing an end to interest rate increases. He added that interest rates were "just below" neutral estimates.


The US central bank warned, in its first report on vulnerabilities in the financial system, that escalating trade tensions with Beijing and other sources of geopolitical uncertainty could spark a decline in investor appetite for risk - a problem given the recent run-up in stocks and other assets. Powell, who took over as Fed chairman in February, has said he wants to provide the public with "plain English" descriptions of what the central bank is up to.

Powell has been gradually raising rates since he was confirmed to his position by Trump in January.

Earlier, hopes for a U.S.

Trump said this week that it was "highly unlikely" he would accept China's request to hold off a planned increase in tariffs. "In addition, other measures of underwriting quality have deteriorated, and leverage multiples have moved up". That comment had unsettled investors who feared that it meant the Fed would need a number of further hikes to get to neutral. But he warned that any corporate debt buildup now could make the next recession more severe.


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