Powell Meeting On? Depends on Who You Ask

07 January, 2019, 08:55 | Author: Denise Dawson
  • Mario Picone center works with fellow specialists on the floor of the New York Stock Exchange Friday Jan. 4 2019

President Donald Trump has criticized the Fed chief for raising interest rates and Bloomberg News reported December 21 that the president had discussed firing Powell.

Stocks were already trading higher after the release of December labor data that showed job and wage growth were still solid despite the market's effort to convince investors otherwise.

"Despite this dovish tone, we are skeptical", Schenker said in a note. "Powell is definitely trying to calm the markets". The Fed has raised interest rates nine times since the end of 2015. This caused investors to dump higher-yielding stocks, raising stock market volatility and driving investors into the safe-haven Treasurys.

He has blamed the Fed for stock market declines and said he is "not even a little bit happy" with Mr Powell, whom he named to lead the Fed in 2017.

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.

Stocks rallied further after Fed Chair Jerome Powell told a gathering of economists that the USA central bank had no "pre-set" plan for interest rates and was carefully monitoring economic conditions. That flexibility, he added, applied as well to the monthly reductions to the Fed's balance sheet.

"That's quite welcome", Powell said.

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Many analysts are girding for a rocky year for markets, owing to the US-China trade war and other unresolved matters, including a government shutdown fight in Washington that President Donald Trump warned Friday could last years as he battles for funding for a border wall with Mexico.

Powell's appearance in Atlanta was his first since last month's rate increase and a public lashing from Trump, who according to sources asked aides about his power to fire the Fed chairman.

Asked if he would resign if Trump asked him to do so, Powell responded with a short "no".

"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.

Traders said Powell's comments were perceived as dovish because he said the Fed had no preset path for policy and could be patient when it comes to future interest rate hikes.

When asked where the smart money would go - would it go to China after the warning Apple gave or would it chase developed markets after the jobs report, he said, "The smart money will be rethinking this whole idea that the global economy is slowing down and my guess it want take much to get the risk on trade back in play again". But it has been gradually reversing that stance over the past year, although the balance sheet still remains above $4 trillion. "US data seem to be on track to sustain good momentum in to the New Year, " he said.

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