Fed chief stands firm on rate policy

Fed chief stands firm on rate policy

Fed chief stands firm on rate policy

Global equity markets rose on Friday after Federal Reserve Chairman Jerome Powell said the USA central bank's policies are best to keep the economy humming, spurring new highs on Wall Street, while oil surged on signs Iran sanctions may crimp worldwide supply.

Speaking on Friday at an annual economic symposium in Jackson Hole, Wyoming, Powell said the central bank faces two major risks - "moving too fast and needlessly shortening the expansion, versus moving too slowly and risking a destabilizing overheating", Xinhua reported.

The Fed´s steady interest rate hikes are the best way to protect the USA economic recovery and keep job growth as strong as possible and inflation under control, Powell said at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyoming.

"This is good news, and we believe that this good news results in part from the ongoing normalization process, which has moved the stance of policy gradually closer to the FOMC's rough assessment of neutral as the expansion has continued", he said.

"What I do see here is an affirmation of the Powell Doctrine: We've got a framework of the way the world works, we have these estimates, but they are subject to imprecision", said Michael Gapen, chief USA economist at Barclays PLC in NY.

Strong economic growth and earnings and low interest rates have combined to continue to move the USA equity market higher, said Leo Grohowski, chief investment officer for BNY Mellon Wealth Management.

There are no clear signs of inflation accelerating above 2 percent, meaning there is little or no risk of overheating. As the Fed comes closer to ending its rate hikes, and the other central banks start to raise rates especially the European Central Bank, the dollar will eventually weaken.

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Powell's remarks came after President Donald Trump last week criticized the central bank's rate hikes and expressed his displeasure with the Fed chair at a Republican fundraising dinner. The Fed is widely expected to resume doing so at its next policy meeting late next month.

"The economy is strong", he said.

"While Powell prefers to speak plainly and in non-technical terms, he may find reason to take a more guarded approach in order to avoid the appearance of open conflict with the administration".

What's more, the RSI is trending north and could find acceptance above 50.00 (in bullish territory) on Monday.

The chairman's measured tone about the economy and his message that the Fed plans to stick with a gradual pace of rate hikes appeared to meet approval with investors.

Long-dated bonds are meanwhile being supported by restrained inflation and demand by foreign central banks that are continuing bond purchase programs. "But probably not that early, it's probably something like late this year, or next year".

Bullard seems to back President Trump in not wanting to raise rates, but of course, he has no say. The bank made a total of seven rate hikes since December 2015, three coming previous year.

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