Powell muddies Fed’s monetary message to pacify markets for now

Powell muddies Fed’s monetary message to pacify markets for now

The Dow Jones Industrial Average on Friday jumped to a fresh peak as a trio of bankers, headlined by current Chairman Jerome Powell, underscored the health of the USA economy but also expressed an attentiveness to a market that has grown fragile amid a spate of interest-rate increases.

The central bank chief's remarks came on the heels of a report released Friday by the U.S. Bureau of Labor Statistics showing U.S. nonfarm payrolls rose by a seasonally adjusted 312,000 in December, well above the average monthly job gains of 254,000 for the last three months and the strongest average employment increase in more than two years.

"Despite this dovish tone, we are skeptical", Schenker said in a note.

By Rich MillerFederal Reserve Chairman Jerome Powell has managed to assuage fickle financial markets by muddying the central bank's monetary message. "The Fed has willfully ignored trade and interest rate risks while talking a hawkish game".

Stocks could be further pressured when companies report quarterly earnings later this month, according to DataTrek Research Co-Founder Nicholas Colas.

"Markets are expressing concerns about global growth in particular and trade negotiations", Powell said.

Federal Reserve Chair Jerome "Jay" Powell took steps to reassure financial markets on Friday, saying that the USA central bank would be "patient" about rate rises.


The S&P closed up 3.4 percent.

At the same time, he reassured investors of the Fed's flexibility.

"There is no pre-set path for policy", Powell said during an appearance at a conference of economists in Atlanta. This response no doubt helped the market to recover on Friday.

Dallas Fed President Robert Kaplan said on Thursday that planned rate hikes should be halted for now, while on Friday Mester said she sees only one or two rate hikes this year. Under the law that governs the Federal Reserve, a president can only remove a Fed chairman for cause.

"The Fed has got a communication problem" when it comes to the balance sheet, said Wrightson ICAP LLC chief economist Lou Crandall. Powell responded with a terse "No" when asked if he would resign if Trump requested him to do so.

The pace of Fed rate hikes and the lowering of the balance sheet, which tends to put upward pressure on interest rates, had both been concerns of investors in recent months. Asked if he had had any face-to-face meetings with Trump, Powell said he had not although he said previous Fed leaders have had discussions from time to time with previous presidents. But she said the turbulence may also stem from a different view of the economy than that shared by many Fed officials who feel confident US growth will remain on track for the next year, with labour markets still strong. No face-to-face meetings have been scheduled, he added.

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