Powell Comments Suggest Fewer Rate Hikes Next Year

The chairman of the US Federal Reserve told the Economic Club of NY that the central bank's main policy rate was now "just below" a neutral level at which it neither boosts nor slows down the rate of growth in the US economy.

In his speech Wednesday to the Economic Club of New York, Powell said the Fed's benchmark interest rate was "just below the broad range of estimates of the level that would be neutral for the economy - that is, neither speeding up nor slowing down growth".

It marked a significant change from comments made by Mr Powell only last month, when he said that the rate was still a "long way" from a neutral level, which had primed Wall Street to expect further rate hikes in coming months.

However, bullion has largely lost out to the dollar this year as investors sought refuge in the greenback as the US-China trade war unfolded against a backdrop of rising interest rates.

Mr Trump added: "I'm not happy with what he [Mr Powell] is doing at all.it nearly looks like he's happy raising interest rates".

The impact of Powell's comments is visible in the spread of Euro-dollar interest rate futures between Dec 2018 and Dec 2019.

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What he actually said was that rates are "just below the broad range of estimates of the level that would be neutral". However, a few officials expressed uncertainty regarding the timing of such rate increases over the next year.

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"While FOMC participants' projections are based on our best assessments of the outlook, there is no preset policy path", Powell said, referring to the central bank's Federal Open Market Committee, which sets interest rates.

Federal Reserve officials are seemingly on track to raise a key interest rate in December, but they showed more caution in their most recent meeting and indicated the pace of future hikes might need to slow given emerging risks to the economy. By contrast, Japan's Nikkei Stock Average rose for a sixth straight session, gaining 0.4% to close out November with a almost 2% gain. "And I think that's what driving the Fed now".

In an interview this week with The Washington Post, Trump said he was not happy with Powell's support for further rate hikes. The S&P 500 and the Dow Jones Industrial Average are both on course to finish slightly higher in November after suffering their worst month in years in October.

And, when presidents do criticise the Fed, they only tend to do it once they have left office. "We saw a good lift up in gold price close to the highs we've seen over the past few weeks", said Jonathan Butler, analyst at MUFG Investor Services.

Powell was cited in the minutes as saying that "it might be appropriate to implement another technical adjustment in the IOER rate relative to the top of the target range for the federal funds rate fairly soon".

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