Fed likely to raise rates in December but concerns mounting: minutes

Fed likely to raise rates in December but concerns mounting: minutes”

On their face, the comments were a reversal from early last month, when Powell said the key interest rate was probably still a "long way" from a so-called neutral level and that the Fed might even tighten policy beyond that level.

"If you look down the road, you see challenges ahead, and they're challenges that are typical in a cycle", said Powell speaking earlier this month at the Federal Reserve Bank of Dallas.

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.

One additional twist investors will need to adjust to next year will be the potential for rate changes at any of the Fed's monthly gatherings. Many people, including Trump, say they are hopeful the two leaders will reach a breakthrough and avoid further tariffs.

Mr Powell said the Fed is paying "very close" attention to economic data even as it expects continued "solid" growth, low unemployment, and inflation near its 2 per cent target.

Mr. Powell's October remark came during an unscripted moment at a moderated discussion in Washington.

The Federal Reserve on Thursday paved the way for a fourth rate hike in December, but sent a clear signal that it would be flexible on plans to raise rates in 2019. Some listeners thought his tone conveyed greater conviction about continuing rate increases.

But Powell also noted a number of looming risks, including the slowdown in global growth and the fading economic benefits of the tax cuts and government spending boost that took effect this year as well as the cumulative effect of the Fed's own rate hikes. The Fed's benchmark federal-funds rate since then has been between 2% and 2.25% - or just below the lowest estimate.

For example, he didn't discuss how recent changes to the economic outlook - including weaker housing sales, rising market volatility and a plunge in oil prices - might influence the Fed's policy path. Some want to see evidence that job growth is slowing, holding the unemployment rate at its current low levels, before they pause rate increases.

The Fed has raised interest rates every quarter this year.

"I do think over time folks will have to get used to the idea that we can and will move at any meeting", said Powell in a question-and-answer session in Dallas.

Mr Powell's nuanced comments eased investor concerns about 2019. It followed several weeks of market volatility that some investors had blamed on uncertainty over the Fed's intentions, among other things.

And now, the stock market loves Jay Powell.

The Fed chairman also said Wednesday that while some corporate debt loads have reached riskier levels, "we do not see unsafe excesses in the stock market".

The US central bank warned, in its first report on vulnerabilities in the financial system, that escalating trade tensions with Beijing and other sources of geopolitical uncertainty could spark a decline in investor appetite for risk - a problem given the recent run-up in stocks and other assets.

Federal Reserve Chairman Jerome Powell says he's pleased with the state of the USA economy but cautions that some forms of corporate debt have reached risky levels.

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

Mr. Powell flagged rising indebtedness and deteriorating loan quality among some US businesses as top vulnerabilities within the USA financial system, but otherwise described such risks as moderate.

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