Why Did Fed Chairman Jerome Powell Back Off on Rate Hikes?


Jerome Powell, the man President Donald Trump chose past year to lead the Federal Reserve, may at times think he's living through a prolonged episode of the "The Apprentice", the reality TV show in which Trump was famous for declaring, "You're fired!"

"Powell said interest rates are "just below the broad range of estimates of the level that would be neutral for the economy", said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

USA crude oil futures settled down Dollars 1.27, or 2.5 percent, at USD 50.29 a barrel, the lowest since October 9, 2017 after U.S. crude inventories rose for a 10th straight week to the highest in a year.

Pilots for US airlines have said that they were not told about a new feature in the MAX that could pitch the nose down sharply if sensors indicate that the plane is about to stall. Silver jumped 1.7 percent to $14.33 an ounce.

Powell's characterisation of interest rates as almost normal "were the magic words", said Gregori Volokhine of Meeschaert Financial Services.

Elsewhere, Indonesia's rupiah climbed as the nation's central bank said it will provide room for the currency to keep strengthening in line with market mechanisms. Instead they will watch economic data, especially inflation.

Trump adds that he is "not even a little bit happy" with Fed Chairman Jay Powell, whom he selected past year.

Stocks surged on Wall Street Wednesday, powering a 600-point gain in the Dow Jones Industrial Average, after the head of the Federal Reserve hinted at slower interest rate increases.

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"Not even a little bit", Trump told the Washington Post. "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".

Mr Trump has criticised Mr Powell repeatedly this year, saying that the base rate is unnecessarily high and risks curtailing an economic boom in the US.

"As always, our decisions on monetary policy will be created to keep the economy on track", he said. In his latest comments Tuesday, Trump blamed the Fed not only for the stock market's declines but also for General Motors' announcement this week of jobs cuts and plant closings.

The report detailed four major risks factors to the stability of the economy: excessive leverage in the financial sector; funding risk, which refers to financial entities relying on sources of funding that can be rapidly withdrawn; excessive leverage in businesses and households; and overvaluation, known in extreme cases as a bubble.

The report is the first of what the Fed intends as a twice a year exercise in flagging risks and delving deep into the weeds of the massive USA private credit system - from bank funding to household credit card default levels and into the thicket of issues like hedge fund borrowing that even the central bank can not fully surveil.

Powell in a recent public appearance said policymakers had suffered "a failure of imagination" back then regarding how central financial stability was to the economy overall.

Meanwhile "the unsettled state of trade negotiations, Brexit negotiations, budget discussions between Italy and the European Union, and cyber-related disruptions" all remain risks to the global economy, he said.