Published: Sun, January 13, 2019
Money | By Wilma Wheeler

Fed chair Jerome Powell to speak on market concerns Thursday

Fed chair Jerome Powell to speak on market concerns Thursday

The us Central Bank, the Federal Reserve has pressed the pause button.

Asked if the Fed still plans two rate hikes, Powell emphasized there is not on a set course.

"So what we're seeing - you would expect at a time like this revenues rising faster than spending, because the economy is strong, more people working, paying taxes, fewer people collecting unemployment benefits and such, and the deficit would shrink", he continued.

USA stocks initially turned lower after Powell said the central bank is sticking with its process of shrinking its balance sheet to a more normal level, which removes stimulus put into place to revive the economy following the financial crisis and recession a decade ago.

That dovish sentiment was echoed by Chicago Fed President Charles Evans, who said in a speech, "I feel we have good capacity to wait and carefully take stock of the incoming data and other developments".

Starting after the January 30 announcement, Powell will hold a press conference after every meeting, rather than just four times a year, giving him many more opportunities to try to communicate with financial markets.

According to the minutes of the Fed's December 18-19 monetary policy meeting released Wednesday, Fed policy makers thought they "could afford to be patient" with future rate hikes.

Powell said last week that he's "listening sensitively to the message that markets are sending" about downside risks.

He also downplayed December predictions from Fed policymakers showing that, at the median, interest rates would be raised twice this year.

The monthly reductions, effectively running on autopilot, have been criticized by some as a steady tightening of financial conditions the Fed should reconsider.

"I don't see a recession", he told a gathering of the Economic Club of Washington.

"Similarly, Trump also softened his stance on China after sharp falls in stock prices".

Powell said that he had never met Trump before he was interviewed by the president in late 2017 for the Fed chairman's job.

"We would have a less clear picture into the economy if it were to go on much longer", said Powell. Fed chairs have met with presidents in the past, he added.

"The Fed's recent caution is something that has never been stated so explicitly and coming on the back of last month's bumper payrolls is a signal it likely to be much more dovish than it was previous year", said CMC Markets analyst Michael Hewson.

World Bank, an worldwide financial institution, also expected the growth rate of the U.S. economy would drop to 2.5 percent in 2019.

But Rosengren, like Evans, are upbeat about the USA economy, while acknowledging the growth will slow this year.

The European Central Bank is widely expected to remain accommodative in 2019, which should keep a lid on the single currency.

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