Dovish Fed Chief Powell Delivers What the Markets Wanted

US stocks rally after strong jobs data, dovish Fed comments

For their part, investors see the next move being a cut, according to pricing in interest rate futures contracts.

"If the President asked you to resign, would you do it?"

"The market's been grappling with growth, the Fed and China", said Tony Roth, chief investment officer at Wilmington Trust in Wilmington, Delaware.

U.S. President Donald Trump has called the Fed's rate hikes a mistake and said he was not happy with Powell.

Powell's remarks reassured investors who have anxious the Fed might raise rates excessively, but Jason Schenker of Prestige Economics suggested the Fed could.

Fed chairman Jerome Powell pacified growing market fears subsequent to Apple's slash of quarterly revenue forecast on Thursday, which incurred steep losses in the three major indexes. Some analysts said investors were acting as if a recession was on the horizon, despite a lack of evidence that the US economy is struggling.

Powell said the Fed is not on a preset path of interest rate hikes and suggested that it could pause its policy tightening as it did in 2016.

The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement.

The Labor Department reported on Friday that 312,000 jobs were created last month, well above market expectations.

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At the conference on Friday, Mr Powell said he has not spoken directly to Mr Trump and would not resign if asked.

Employment data showed the United States added 312,000 jobs in December, much above analyst expectations, strengthening the case of those who have argued that markets have overreacted to signs that U.S. growth may have peaked.

Meanwhile the Labor Department said USA employers added 312,000 jobs last month, a far stronger result than experts had anticipated.

A new jobs report on Friday showed USA employers added more than 300,000 jobs in December - well above expectations. "There aren't signs of significant economic weakness". A third Fed president, Thomas Barkin of Richmond, said he is hearing more concerns about economic risks and trade.

Speaking after months of volatility in world bond and stock markets, Powell avoided some of the communication missteps that in the past have roiled rather than calmed investors.

Analysts predicted that job reports for January and February will be more of a policy reference for the Fed than the December report as they would provide a clearer picture of how tightened financial conditions affect the USA economy. "Some years ago, we decided that rate policy was going to be the active policy tool and the balance sheet would be allowed to shrink gradually and predictably in the background", he said.

Powell said he did not think the latter was having much impact on markets, but that the strategy would be changed if it started interfering with the bank's broader goals of maintaining strong employment and stable inflation.

The Fed chairman added: "I'll just say that we are listening carefully to that. listening sensitively to the message that markets are sending and we are going to be taking those downside risks into account as we make policy going forward".

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