Fed hints at higher rates despite Trump attack

Fed Rate hike 'warranted soon'

Jerome Powell, chairman of the U.S. Federal Reserve, speaks at a meeting of the Economic Club of NY in New York, U.S., on Wednesday, Nov. 28, 2018.

Powell, in a speech in NY on Wednesday, said interest rates appear to be just below the level the Fed calls "neutral", where they neither stimulate growth nor impede it. 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. "From the financial stability perspective, however, today we do not see risky excesses in the stock market", Powell said.

Talking about the economic outlook, Powell said the Federal Open Market Committee is forecasting continued solid growth, low unemployment, and inflation near 2 percent.

If the Fed, as expected, raises the fed-funds rate next month to a band between 2.25% and 2.5%, that would leave it touching the bottom of the range of neutral estimates but four more quarter-percentage-point increases from the top.

"He's now acknowledging he's close to neutral, which suggests maybe not quite as many rate hikes in the future as investors believed".

Federal Reserve chairman Jerome Powell has opened the door for a potential pullback in projected USA interest rate hikes for 2019 following a widely expected increase in December.

For next year, the central bank has suggested that it plans three rate hikes.

The CME Group's FedWatch Tool, an algorithm that calculates the probability of a rate hike in a given month, is now showing an 82.7% chance the Federal Reserve will institute a fourth rate hike for December.

Participants agreed that an additional rate increase was "likely to be warranted fairly soon".

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Trump has also singled out Powell on multiple occasions for continuing to support the rate hikes. He has more recently called the Fed "crazy" and "loco" over recent interest-rate increases.

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

Many economists also worry about potential economic damage caused by President Donald Trump's trade dispute with China and other nations. But signs of a slowdown overseas and almost two months of market volatility - including a sharp selloff last week - have clouded an otherwise mostly rosy US picture in which the economy is growing well above potential and unemployment is the lowest since the 1960s.

In remarks delivered Wednesday in New York, Fed chairman Jerome Powell uttered words that set Wall Street on fire. Those increases have raised its benchmark rate to a still-historically-low range of 2 percent to 2.25 percent.

While Powell said Fed officials are monitoring these risks, they are not, on the whole, too anxious about them.

Since then, key officials including Vice Chairman Richard Clarida and New York Fed President John Williams have seemingly walked back the remark.

Trump has previously lamented interest rate hikes and expressed regret about nominating Powell. Trump tapped Powell past year to be Fed chairman after he decided against giving Janet Yellen a second term.

The minutes showed a couple of participants felt the benchmark fed funds rate "might now be near its neutral level and that further increases in the federal funds rate could unduly slow the expansion of economic activity". But some economists say three rate increases for next year are beginning to look less certain.

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