Fed: Rate hike 'warranted soon'

President Trump Says the Federal Reserve Is a 'Much Bigger Problem Than China'

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 NY.

"We also know that the economic effects of our gradual rate increases are uncertain and may take a year or more to be fully realised", he said, adding that there was "no preset policy path".

Speaking to the Economic Club of New York Powell said interest rates were now "just below" the range Fed officials consider neutral, a setting created to neither speed nor slow growth.

Federal Reserve Chairman Jerome Powell cast a bright picture of the US 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.

In his NY speech Wednesday, Powell did not dispute the widely held belief that the Fed will raise interest rates again in December, saying, "There is no preset policy" about tightening.

Trump has repeatedly attacked Powell over rate increases, calling the investment banker he selected past year to oversee the world's most powerful central bank a "threat". But he said the Fed's gradual increases balanced the risks between raising too much and not enough.

U.S. Federal Reserve (Fed) said on Thursday that nearly all Fed policymakers expected another interest rate hike "likely to be warranted fairly soon".

The "just below" language stands in contrast to Powell's October comments that interest rates were a "long way" from neutral, a remark some had blamed for triggering the sell-off in stocks that have shaken investors over the last two months.

Stocks and interest-rate futures jumped, even while economists wrestled to interpret whether Powell meant to send a message or was simply misunderstood.

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Almost all economists anticipate the Fed will raise rates at the upcoming meeting in December, and the Fed has penciled in three rate hikes in 2019 - though it remains to be seen whether Powell will follow through with that plan after his comments this week.

"Powell is not suggesting that since they are just below the range they may stop soon". "We will be paying very close attention to what incoming economic and financial data are telling us".

Trump has repeatedly attacked Powell for continuing to raise the benchmark lending rate, which he says undermines the work he is doing to juice the U.S. economy.

"Even if central bank policies are fully anticipated by the public, some adjustments could occur abruptly, contributing to volatility in domestic and global financial markets and strains in institutions", according to the Fed report. To date, markets have considered quarter-end meetings in March, June, September and December as "live" meetings that result in rate changes.

And Powell repeated the view that the current level - at 2.25% - is "just below" the estimate of neutral, a rate that neither stimulates nor restrains the economy.

"What do you do?" said Powell in NY.

In November, Fed policymakers agreed to hold rates steady, leaving the benchmark rate unchanged in a range of 2% and 2.5%.

"It removes concerns of a Fed dead set on tightening up to a point where rates would intentionally slow down the economy", said Roberto Perli, an analyst at Cornerstone Macro, in a report Wednesday.

In his speech Wednesday, Powell spoke directly to the stock market volatility and somewhat downplayed the recent action.

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