Fed's Powell, in apparent dovish shift, says rates near neutral

Fed's Powell, in apparent dovish shift, says rates near neutral”

United States central bankers believe another interest rate hike is due "fairly soon", boosting widespread expectations the Federal Reserve will raise lending costs next month, according to meeting minutes released Thursday.

The Fed members' comments could comfort investors, who rallied on Wall Street after Fed Chairman Jerome Powell on Wednesday said interest rates were already close to estimates of "neutral" - the rate which neither accelerates not restrains economic activity - meaning they might not have to rise much higher. The Fed altered its stance on rates to "just below the neutral rate" from its earlier articulated position of "a long way to neutral", lowering the chances of quick increases in the cost of funds.

Stocks and interest-rate futures jumped, even while economists wrestled to interpret whether Powell meant to send a message or was simply misunderstood. Trump told the Washington Post just on Tuesday that he is "not even a little bit happy" with the Fed chief.

Meanwhile in the US where the key rate is 2%-2.25%, the US Federal Reserve is signaling a slowdown in its planned rate hikes following fierce criticism by President Donald Trump.

No, Mr Powell has blinked in the face of some unpleasant personal attacks from Mr Trump.

Powell added the Federal Open Market Committee, which sets rates, will make policy decisions based on developing conditions, not through a predetermined plan. The minutes show support for a fourth rate hike this year when the committee meets again, December 18-19, if the labor market and inflation continue as expected.

Not only is the currency headed for its biggest monthly gain against the dollar this year, but also its best November in 30 years.

"I think [Trump] has gotten in [Jerome Powell's] head and he's made a difference". I'm doing deals and I'm not being accommodated by the Fed.

That excitement in the market led to the Dow Jones index surging 618 points, or 2.5 per cent, to 25,366.

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. "But I think they are overpriced", he said. But that meeting may stand out more for the fresh economic projections that policymakers will issue, providing a clearer view of how their perceptions of the economy and the proper path for rates may have changed in recent weeks.

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