Published: Fri, November 30, 2018
Markets | By Otis Pena

Fed Chief's Remarks On Economy And Interest Rates Cheer Investors

Fed Chief's Remarks On Economy And Interest Rates Cheer Investors

Jay Powell, chairman of the Federal Reserve, appeared to signal a nearer end to the U.S. central bank's interest-rate hikes yesterday, saying rates are now "just below" estimates of neutral, less than two months after he said they were probably "a long way" from that point. Instead they will watch economic data, especially inflation.

Federal Reserve Chairman Jerome Powell touched off a surge in stock prices Wednesday after saying the outlook for the US economy remains solid and interest rates are almost within a "neutral" range. "Our gradual pace of raising interest rates has been an exercise in balancing risks".

And he repeated the view that the Fed's policy rate - at 2.25 percent - is "just below" the estimate of neutral, a rate that neither stimulates nor restrains the economy.

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

But the report highlighted stock prices that are high by some measures, commercial real estate values "growing faster than rents" and the willingness of lenders to fund risky corporate loans.

"They're making a mistake because I have a gut and my gut tells me more sometimes than anybody else's brain can ever tell me", the president added.

"So far, I'm not even a little bit happy with my selection of Jay".

US President Donald Trump has repeatedly attacked Powell for raising the benchmark lending rate but the Fed chief and other officials say the attacks have no influence on the deliberations of the independent central bank (AFP

US President Donald Trump has openly criticised Mr Powell for his leadership of the Fed, despite selecting him for the job.

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. "As always, our decisions on monetary policy will be created to keep the economy on track in light of the changing outlook for jobs and inflation".

Powell and other officials have dismissed the unprecedented political attacks from Trump, saying they have no influence on deliberations of the independent central bank.

"By clearly and transparently explaining our policies, we aim to strengthen the foundation of democratic legitimacy that enables the Fed to serve the needs of the American public".

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.

Powell's speech was focused largely on a new Fed report on stability of the United States financial system, but contained an unusual comment: "By clearly and transparently explaining our policies, we aim to strengthen the foundation of democratic legitimacy that enables the Fed to serve the needs of the American public".

Life expectancy in the USA continues to fall
In addition to suicide, the United States is experiencing a drug abuse crisis, with more than 70,000 overdose deaths past year . Though constant, the rate has increased over time from about 10 suicides per 100,000 in 1999 to 14 per 100,000 in 2017.


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