Fed officials express caution about pace of future hikes

United States Federal Reserve Chairman Jerome Powell cast a bright picture of the USA economy Wednesday and appeared to suggest that the Fed might consider a pause in its interest rate hikes next year to assess the impact of its credit tightening. The minutes show support for a fourth hike this year if the labour market and inflation meet or exceed expectations.

Powell also revealed the economic growth coincides with inflation, and the Fed's annual goal of 2 percent interest rate increases.

Feldstein, an Economic Club of NY member and one of only two people who questioned Powell Wednesday, said Powell's speech struck a good balance for investors. "By contrast, interest rate control might be hard to achieve in an operating regime of limited excess reserves".

After several years of steadily raising interest rates, Federal Reserve officials discussed this month a more flexible policy of setting rates.

"Interest rates are still low, by historical standards, and they remain just below the range of estimates of that level, that would be neutral for the economy", said Powell. The US federal funds rate range is now 2.0 - 2.5 per cent. "This was again on display today", RBC Capital Markets chief USA economist Tom Porcelli wrote in a note.

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Powell's comments ignited a rally on Wall Street, with the Dow Jones Industrial Average surging more than 300 points after his remarks were released.

No, Mr Powell has blinked in the face of some unpleasant personal attacks from Mr Trump. Powell repeated his view that the Fed will have to be especially responsive to incoming economic data.

Speaking of the heading of Fed's monetary policy, a few policymakers expressed uncertainty about the timing of future rate increases.

According to Joseph LaVorgna, chief Americas economist at Natixis, "the Fed needs to stop raising rates".

Moving forward, investors will now turn their attention to the release of minutes from the USA central bank's November meeting in order to obtain further clues on the Fed's monetary tightening path. Higher rates tend to slow economic growth over time as well as pressure stock prices. "We already passed that, as the housing market shows", he said on CNBC, referring to this year's steady decline in home sales and construction - something analysts partly blame on higher mortgage rates. That comment had unsettled investors who feared that it meant the Fed would need a number of further hikes to get to neutral.

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