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Stocks cheer Fed chief speech, dollar dips

27 August, 2018, 11:11 | Author: Melinda Barton
  • Fed chair Jerome Powell’s highly anticipated speech: what to expect

Gold futures on the COMEX division of the New York Mercantile Exchange closed higher on Friday, as the us dollar extended losses in the wake of a closely followed speech from Federal Reserve Chairman Jerome Powell.

Powell says this gradual approach is the wisest policy for the Fed in trying to navigate between the risks of raising rates too fast and thus "needlessly shortening the expansion" and moving too slowly and risking an overheated economy. In an interview with CNBC, St. Louis Fed President James Bullard said he thinks there should be no more rate hikes for the remainder of this year.

"I am confident that the FOMC would resolutely "do whatever it takes" should inflation expectations drift materially up or down or should crisis again threaten".

Increasing consensus at the Federal Reserve on the need to continue raising USA interest rates was on display at the start of a global central bankers meeting here, as the longstanding distinction between so-called policy hawks, centrists and doves blurs in the face of falling unemployment.

Powell adds that while annual inflation has risen to near the Fed's 2 percent target rate, it doesn't seem likely to accelerate above that point.

Powell's speech will also be watched for any response he might offer to criticism by U.S. President Donald Trump, who told Reuters on Monday that he is "not thrilled" with rate increases during Powell's term as Chairman. The Fed is widely expected to resume doing so at its next policy meeting late next month. A strong economy and robust corporate results have supported investment appetite for equities.

"Jerome Powell hit the dollar with a fairly dovish set of remarks at Jackson Hole", said Neil Wilson of Markets.com said in a note to clients. But, if the bank moves too slow, the economy could overheat. "But probably not that early, it's probably something like late this year, or next year".


A Grand Teton National Park officer stands watch Friday outside the room where the Jackson Hole Economic Policy Symposium was taking place at Jackson.

The odds of two additional hikes this year increased this week as Fed officials were seen as more hawkish.

Though Powell chose not to mention Trump's criticism, other Fed officials asserted that the president's complaints about rate hikes would have no effect on their policymaking.

An inverted yield curve, when short-term borrowing costs rise above long-term ones, has preceded almost every USA recession in recent memory.

The Fed's overnight lending rate is now in a range of 1.75 per cent to 2.00 per cent.

After having kept its key policy rate near zero for seven years to help lift the economy out of the Great Recession, the Fed has raised rates seven times, most recently in March and June this year.

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