NEW YORK (Reuters) - Federal Reserve Chair Jerome Powell on Wednesday appeared to signal the U.S. central bank is nearing an end to its interest-rate hikes, saying the Fed’s policy rate is now “just below” a level that neither brakes nor boosts a healthy economy.
Stocks and interest-rate futures jumped in response. The comments were a reversal from early last month, when Powell had said rates were probably still a “long way” from a so-called neutral level and that the Fed may even go beyond that level. Those remarks sent stocks down as investors bet the Fed would need more rate hikes to prevent the economy from overheating.
Powell’s dovish shift in language came as U.S. President Donald Trump stepped up attacks on Powell for rate hikes Trump sees as undercutting his economic and trade policies, telling the Washington Post just yesterday that he is “not even a little bit happy” with the Fed chief.
Powell “gave the market, and presumably President Trump, exactly what he wanted, which was an admission that the previously proposed path of future rate hikes was probably too aggressive and opening to slowing the rate of hikes,” said Oliver Pursche, vice chairman and chief market strategist at Bruderman Asset Management in New York.
The Fed has settled into a quarterly rate-hike cycle and is expected to tighten policy again next month. But signs of a slowdown overseas and nearly two months of market volatility - including a sharp selloff last week - have clouded an otherwise mostly rosy U.S. picture in which the economy is growing well above potential and unemployment is the lowest since the 1960s.
Powell said the Fed is paying “very close” attention to economic data even as it expects continued “solid” growth, low unemployment and inflation
