Thursday, 17 January, 2019

Fed Chief Jerome Powell Says He Won't Resign If Trump Asks

Wall Street was cheered by Fed chief Jerome Powell's comments bouncing 3% before midday and recovering much of Thursday's lost ground US stocks rally after strong jobs data, dovish Fed comments
Johnnie Parks | 07 January, 2019, 04:42

Speaking after months of volatility in world financial markets, and just hours after a monthly jobs report suggested the US economy remained robust, Powell's soothing comments initially pushed stock indexes higher.

Shortly after a bullish jobs report for December sparked a small rally in the ailing stock market, Fed Chairman Jerome Powell ignited an even stronger surge after he delivered just what the doctor ordered - that the Fed will be flexible on monetary policy and it is in no rush to raise interest rates.

"Particularly with the muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves", he told the American Economic Association, adding that the Fed is not on a preset path of tightening policy and suggesting it could pause rate hikes as it did in 2016.

A new jobs report on Friday showed United States employers added more than 300,000 jobs in December - well above expectations. But some investors have anxious that that process could push long-term rates higher at a time when the economy was slowing. Under the law that governs the Federal Reserve, a president can only remove a Fed chairman for cause.

Powell's remarks reassured investors who have anxious the Fed might raise rates excessively, but Jason Schenker of Prestige Economics suggested the Fed could.

Here's a run-down of the data that have - and haven't - changed since the Fed chief briefed the media on December 19 after policy makers raised rates and signaled two more hikes in 2019.

"The market's been grappling with growth, the Fed and China", said Tony Roth, chief investment officer at Wilmington Trust in Wilmington, Delaware. Do we need to move more, faster? "The Fed has wilfully ignored trade and interest rate risks while talking a hawkish game".

Following Powell's remarks, Treasury yields rose and futures traders began pricing in a small chance of a rate hike this year, versus no chance seen before Powell began speaking. Echoing that assertion, the central banker said at the Atlanta event that the Fed was ready to change course "significantly if necessary".

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The US central bank has faced criticism from US President Donald Trump for moving too quickly to increase rates.

Asked if any future meeting with Trump was scheduled, Powell said, "I have no news on that".

The recent market turbulence has posed a dilemma for the Fed, as a seeming loss of confidence in financial markets about the US economy's prospects was offset by upbeat data from the real economy, including a strong December jobs report.

Meanwhile the Labor Department said USA employers added 312,000 jobs last month, a far stronger result than experts had anticipated.

"That's quite welcome", Powell said. "Some years ago, we decided that rate policy was going to be the active policy tool and the balance sheet would be allowed to shrink gradually and predictably in the background", he said.

Powell "said exactly what the markets wanted to hear", said Gregori Volokhine of Meeschaert Financial Services.

"We're listening carefully with - sensitivity to the message that the markets are sending and we'll be taking those downside risks into account as we make policy going forward", Powell said.

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