Published: Thu, November 29, 2018
Business | By Eloise Houston

Fed Chief's Remarks On Economy And Interest Rates Cheer Investors

Fed Chief's Remarks On Economy And Interest Rates Cheer Investors

The positive sentiment surrounding GBPUSD pair was further boosted by dovish comments made by Fed Chair Jerome Powell yesterday when he said that USA interest rates were just below neutral which was in stark contrast to hawkish comments made by both Fed bigwigs and Powell himself in his previous Fed rate hike related speeches and investors have interpreted the latest comment as signal that rate hike cycle was nearing its end which caused US Treasury Yields to go lower and also saw US Greenback lose ground significantly across major risky assets in all key global markets. "Not even a little bit", the President said of the man he hand-picked for the job a year ago.

Trump claimed the Fed is "way off-base with what they're doing", in raising interest rates that were at historical lows following the financial meltdown that started in 2007.

Stocks surged following Federal Reserve chair Jerome Powell's comments at the Economic Club of NY during which he addressed risk factors to the health of the economy, softened his tone on monetary policy, and offered a fairly reassuring check-up on the economy on the heels of sharp disapproval from President Trump.

The Australian dollar surged on Wednesday as doubts about the pace of rate hikes from the US Federal Reserve resurfaced.

President Trump has been a vocal critic of the Fed's rate hikes ー and of Powell personally.

"I think the president got to him", Geltrude said, adding that Trump acted like a baseball team's manager berating the umpire for a bad call. The increases have infuriated Trump who has consistently criticized Powell and this week blamed recent stock market sell-offs and General Motors' decision to lay off 14,700 people in part on Powell.

"High leverage has historically been linked to elevated financial distress and retrenchment by businesses in economic downturns", the Fed said in a section of its report highlighting how indebted companies are borrowing even more money. That might mean the Fed isn't planning to raise interest rates far above their current levels. "They're making a mistake because I have a gut, and my gut tells me more sometimes than anybody else's brain can ever tell me".

Powell didn't specifically cite the criticism he has faced from the White House, but he deliberately defended the Fed's recent moves and said "there is no preset policy path".

His comments marked a sharp change from his position last month, when he said the Fed still had a "long way" to go before it reached that equilibrium. Bond yields slipped and the dollar weakened as investors adjusted their expectations for how quickly interest rates might rise in the future. Trump has complained that the Fed is threatening to undo the economic stimulus being provided by the tax cuts and that its rate hikes are unnecessary because inflation has remained relatively low.

The minutes of the Fed's November monetary policy meeting will also be released at 6am AEDT, providing another event that could spark volatility in financial markets. Those trends, he said, were coinciding with inflation remaining "right on target" at the Fed's goal of 2 percent annual price increases. But some economists say three rate increases for next year are beginning to look less certain.

"I think we are so enamored on those issues after would be very hard for them to surprise us into a crisis one more time".

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